Buying a home is a big step and one of the most important investments you’ll ever make. Because it’s such a big deal, trying to figure out how you’re going to pay for it can be really scary. Which home loans should I apply for? How much down payment do I need to buy a home? Will I even qualify?

These are probably questions you’ve asked yourself during the home buying process. But don’t worry, we’ve got you covered. To help you navigate the great, big world of home loans, here are the different types of home loans and how to qualify.

Conventional Loans

Conventional loans are pretty much the most common type of home financing. They aren’t backed by the government, but instead, they’re issued by private lenders like banks and credit unions.

In order to quality, you typically need to have good credit and a decent enough income. After they approve you, the cost for a down payment is usually around 20 percent. If you can’t pay that amount, you can put down less, but you’ll have to pay for private mortgage insurance instead.

Pros: Flexibility regarding loan amount and repayment options.

Cons: Require a higher credit score and down payment compared to some government-backed loans.

FHA Loans

Federal Housing Administration —a.k.a. FHA — loans are a bit more beginner-friendly. They’re usually popular among first-time homebuyers or people who don’t have the best credit. Unlike conventional loans, FHA loans are backed by the government, which means the lending standards are more lenient.

To qualify, you only need a credit score of 580, and you can expect to pay as little as 3.5% for your down payment.

Pros: Lower credit score and down payment requirements.

Cons: You have to pay mortgage insurance premiums, which can add to your monthly costs.

VA Loans

If you’re a veteran, active-duty service member, or eligible family member, you might qualify for a VA loan. Because these loans are backed by the Department of Veterans Affairs, they come with crazy good benefits like no down payment and no private mortgage insurance. Plus, VA loans often come with competitive interest rates.

Pros: No down payment, no PMI, and favorable interest rates.

Cons: Only eligible veterans, service members, and their families can participate.

Jumbo Loans

Jumbo loans are for people who want to buy homes that cost more than the limits set by Fannie Mae and Freddie Mac, the government groups that support most regular loans. And because jumbo loans are for a lot higher amounts, the qualification standards have to be high, too.

Pros: Can finance luxury or expensive properties.

Cons: Higher credit score and down payment requirements, plus potentially higher interest rates.

USDA Loans

If you plan on moving to a rural area, the United States Department of Agriculture is willing to pay you for it. Even better, these loans don’t even require a down payment.

To qualify, you need to have a low-to-moderate income and be ready and willing to buy a place in a designated rural area.

Pros: No down payment and low interest rates.

Cons: Rigid income and location requirements.

Adjustable-Rate Mortgages

Next up, adjustable-rate mortgages. These loans offer an interest rate that’s set for a certain initial period — typically either 5, 7, or 10 years. Those rates are then adjusted periodically based on market conditions, meaning your monthly payments will likely vary over time.

ARMs can be a good choice if you plan to sell or refinance your home before the adjustable period kicks in.

Pros: Lower initial interest rates compared to fixed-rate mortgages.

Cons: Potential for higher payments when the rate adjusts.

Fixed-Rate Mortgages

Fixed-rate mortgages are the simplest type of home loan. With a fixed-rate mortgage, your interest rate stays the same for the entire loan term, usually around 15 or 30 years. Knowing exactly how much you have to pay each month makes budgeting easier since your payments won’t ever change.

Pros: Predictable monthly payments and protection against rising interest rates.

Cons: Higher initial interest rates compared to adjustable-rate mortgages.