Topic Cluster

Mortgage Loan Types

8 terms

Not all mortgages carry the same distress risk. The type of loan a borrower holds — FHA, VA, conventional, adjustable-rate — determines their insurance costs, foreclosure protections, and vulnerability to economic shocks. The American Distress Index tracks this through the FHA-to-bank-booked mortgage delinquency split: in 2026-Q2, Mortgage Bankers Association National Delinquency Survey data put FHA delinquency at 11.79% while Board of Governors of the Federal Reserve System data retrieved via FRED data put bank-booked single-family mortgage delinquency at 1.86%, a 6.3 times gap that signals a two-tier mortgage market.

Understanding loan types matters because available assistance and risks differ. FHA- and VA-backed loans and conventional loans owned by Fannie Mae or Freddie Mac have program-specific servicing options, but no forbearance, Partial Claim, modification, or other result is automatic. Borrowers with any loan type can contact their servicer and a HUD-approved housing counselor; VA-backed borrowers can also ask a VA loan technician for help. Adjustable-rate borrowers may also face payment changes when the rate resets.

Mortgage Type Comparison

Feature FHA VA Conventional
Min. down payment 3.5% 0% 3-5%
Min. credit score 580 No VA minimum (lenders set ~620) 620
Mortgage insurance 1.75% upfront + 0.55%/yr (life of loan) None (funding fee 1.25-3.3% once) PMI until 80% LTV, then cancels
Max DTI 57% with compensating factors No hard cap (residual income test) 43-45% (QM limit)
Delinquency (2026-Q2) 11.79% MBA NDS category differs 1.86%
Where to seek help Servicer; HUD-approved housing counselor; FHA Resource Center Servicer; HUD-approved housing counselor; VA loan technician Servicer; HUD-approved housing counselor; Fannie Mae or Freddie Mac resources when applicable

See The FHA Signal for current delinquency tracking, or Housing Affordability Statistics for broader mortgage market data.

Terms in This Cluster

Adjustable-Rate Mortgage (ARM) A mortgage with an interest rate that adjusts periodically after an initial fixed period. Lower starting rates but payment shock risk when the rate resets. Conventional Loan A mortgage not backed by a government agency. Typically requires higher credit scores and larger down payments than FHA loans. FHA Loan A mortgage insured by the Federal Housing Administration, with FHA-specific servicing and loss-mitigation rules. Land Contract Seller financing where the buyer pays installments but doesn't receive the deed until paid in full. The seller keeps title as security — and can cancel the contract if the buyer defaults. Reverse Mortgage A loan allowing homeowners 62+ to tap home equity without monthly payments. The loan balance grows over time and is repaid when the borrower sells, moves, or dies. Subprime Mortgage A mortgage for borrowers with credit scores below 620 or other risk factors. Higher rates compensate for elevated default risk — central to the 2008 financial crisis. VA Loan A mortgage guaranteed by the Department of Veterans Affairs — no down payment, no PMI, and competitive rates for eligible veterans and service members. Wraparound Mortgage Seller financing where a new loan wraps around the seller's existing mortgage. The buyer pays the seller, who continues paying the underlying lender. High risk for both parties.

Related Topics

Mortgage Default Terms What happens when borrowers fall behind Loss Mitigation Terms Options to avoid foreclosure by loan type Foreclosure Terms The foreclosure process from start to finish Bankruptcy Terms How bankruptcy interacts with mortgage debt
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