Loan types
Every loan type, explained in plain English.
As a broker, we shop many lenders, so we can offer far more than one bank’s menu. From first-time buyer loans to self-employed and investor options, here’s what each one is and who it fits.
— First, QM vs. Non-QM
Two families of loans
Qualified Mortgages (QM)
Loans that follow the federal Ability-to-Repay rules: fully documented income, standard features, and limits on fees and debt-to-income. Conventional, FHA, VA, USDA, and most jumbo loans are QM. They usually have the lowest rates.
Non-QM loans
Loans that verify your ability to repay in other ways, like bank statements, assets, or rental income. They’re made for self-employed borrowers, investors, and anyone whose finances don’t fit a standard box. Rates are usually higher, and down payments are larger.
Jump to: Conventional · FHA · VA · USDA · Jumbo · Renovation
Non-QM: Bank statement · 1099 · Profit and loss · Asset depletion · DSCR · Interest-only · Foreign national · ITIN · Recent credit event
At a glance
| Loan | Typical down payment | Typical credit score | Type |
|---|---|---|---|
| Conventional | 3% to 5% | About 620+ | QM |
| FHA | 3.5% | 580+ (500 with 10% down) | QM |
| VA | 0% | Lender minimum, often 580 to 620 | QM |
| USDA | 0% | Often 640 | QM |
| Jumbo | 10% to 20% | Often 700+ | QM |
| Bank statement | 10%+ | Often 620 to 660+ | Non-QM |
| 1099 / P&L | 10%+ | Often 620 to 660+ | Non-QM |
| Asset depletion | 20%+ | Often 660+ | Non-QM |
| DSCR | 20% to 25% | Often 660+ | Non-QM |
| Foreign national | 25% to 30%+ | International references | Non-QM |
| ITIN | 10% to 20% | Traditional or alternative | Non-QM |
— Qualified Mortgages
The common loans most buyers use.
Most popular · Qualified Mortgage
Conventional loans
Backed by Fannie Mae or Freddie Mac rather than the government. The most common loan for buyers with solid credit.
Best for: Buyers with a credit score around 620 or higher who want the lowest overall cost.
- Down payment: as little as 3% for qualifying buyers (HomeReady and Home Possible programs), 5% or more otherwise
- Mortgage insurance (PMI) under 20% down, and it can be removed once you reach enough equity
- 2026 loan limit: $832,750 for a single-family home in most Texas counties
- Works for primary homes, second homes, and investment properties
If your credit is strong, conventional is often the cheapest loan over time because PMI goes away.
Flexible credit · Qualified Mortgage
FHA loans
Insured by the Federal Housing Administration. Designed to help buyers with lower credit scores or smaller down payments.
Best for: First-time buyers, buyers rebuilding credit, or buyers with higher debt-to-income ratios.
- Down payment: 3.5% with a 580+ credit score (10% down for 500 to 579)
- Upfront mortgage insurance of 1.75% (rolled into the loan) plus a monthly premium
- Monthly mortgage insurance usually stays for the life of the loan with under 10% down
- For primary homes only. County loan limits apply
- Gift funds allowed for the full down payment
FHA can be the right fit when credit is under about 680. Many buyers refinance to conventional later to drop the mortgage insurance.
No down payment · Qualified Mortgage
VA loans
Guaranteed by the Department of Veterans Affairs. One of the best loans available, earned through military service.
Best for: Eligible veterans, active-duty service members, some National Guard and Reserve members, and some surviving spouses.
- Down payment: none required
- No monthly mortgage insurance
- One-time VA funding fee (can be rolled in), waived for veterans with a service-connected disability rating
- Seller can pay closing costs and up to 4% in concessions
- For primary homes, including 2 to 4 unit properties you live in
VA loans can be used more than once. We help you get your Certificate of Eligibility.
Rural and suburban · Qualified Mortgage
USDA loans
Backed by the U.S. Department of Agriculture to encourage homeownership outside big cities.
Best for: Buyers with moderate income looking in eligible rural and suburban areas, including some communities on the edges of greater Houston.
- Down payment: none required
- 1% upfront guarantee fee plus a 0.35% annual fee (lower than FHA mortgage insurance)
- Household income limits and property location rules apply
- For primary homes only
Many areas you might not think of as rural qualify. Send us an address and we’ll check it.
Higher-priced homes · Qualified Mortgage
Jumbo loans
For loan amounts above the conforming limit ($832,750 in 2026 in most Texas counties).
Best for: Buyers of higher-priced homes in areas like Memorial, River Oaks, West University, and The Woodlands.
- Down payment: usually 10% to 20%
- Credit: usually 700 or higher
- Reserves: often 6 to 12 months of payments in the bank
- Rates are often competitive with conventional loans
Some jumbo programs allow 10% down without mortgage insurance.
Buy and fix up · Qualified Mortgage
Renovation loans (FHA 203k and HomeStyle)
Finance the home and the repairs or upgrades in one loan, based on the value after improvements.
Best for: Buyers who find the right location but the house needs work.
- FHA 203(k): 3.5% down, for repairs and upgrades on a primary home
- Conventional HomeStyle: as little as 3% to 5% down, can include luxury upgrades
- Contractor bids and an approved scope of work are required
A great tool in a tight market. A dated house often has less competition.
— Non-QM
Loans for people who don’t fit the box.
Self-employed · Non-QM
Bank statement loans
Qualify using 12 or 24 months of personal or business bank statements instead of tax returns.
Best for: Self-employed borrowers and business owners whose tax returns show less income because of write-offs.
- Down payment: usually 10% or more
- Income is calculated from your average deposits
- No tax returns required in most cases
- Works for primary homes, second homes, and investment properties
If you write off a lot on your taxes, this is often the loan that gets you approved.
Contractors · Non-QM
1099 loans
Qualify using your 1099 forms instead of full tax returns.
Best for: Independent contractors, real estate agents, and gig workers paid on a 1099.
- Down payment: usually 10% or more
- Usually 1 to 2 years of 1099s
- Simpler paperwork than full tax returns
Realtors: this one is built for you.
Business owners · Non-QM
Profit and loss (P&L) loans
Qualify using a profit and loss statement, often prepared by a CPA or tax preparer.
Best for: Business owners with strong current income that isn’t fully reflected in past tax returns.
- Down payment: usually 10% to 15% or more
- P&L usually covers the last 12 to 24 months
- Some programs pair the P&L with 2 months of bank statements
Good for a business that grew a lot this year.
Savings-based · Non-QM
Asset depletion loans
Your savings, investments, or retirement accounts are converted into monthly qualifying income.
Best for: Retirees, people living off investments, and high-net-worth buyers with little traditional income.
- Down payment: usually 20% or more
- Assets are divided over a set number of months to calculate income
- No job or employment income required
You don’t have to sell your investments to qualify.
Investors · Non-QM
DSCR loans
Qualify on the rent the property brings in, not your personal income.
Best for: Real estate investors buying or refinancing rental properties, including short-term rentals.
- Down payment: usually 20% to 25%
- Rent divided by the full payment (DSCR) is usually 1.0 or higher
- No tax returns or employment verification
- Can close in an LLC. Prepayment penalties are common
Read our full DSCR guide or try the DSCR calculator.
Lower starting payment · Non-QM
Interest-only loans
Pay only interest for an initial period (often 10 years), then principal and interest.
Best for: Investors focused on cash flow and borrowers with uneven income who want a lower required payment.
- Payment rises when principal payments start
- Often paired with DSCR or bank statement loans
- Usually needs a bigger down payment
You can still pay extra principal anytime.
International buyers · Non-QM
Foreign national loans
For buyers who are not U.S. citizens or permanent residents and don’t have U.S. credit.
Best for: International buyers purchasing a second home or investment property in Texas.
- Down payment: usually 25% to 30% or more
- Credit can be shown with international references
- Often uses DSCR or asset-based qualifying
Houston’s international community makes this a common need.
ITIN borrowers · Non-QM
ITIN loans
For borrowers who file taxes with an Individual Taxpayer Identification Number instead of a Social Security number.
Best for: Hard-working families who pay taxes with an ITIN and want to own their home.
- Down payment: usually 10% to 20%
- Usually 2 years of tax returns filed with an ITIN
- Credit can be traditional or alternative
Owning is possible with an ITIN. Ask us how it works.
Second chance · Non-QM
Recent credit event loans
For borrowers with a recent bankruptcy, foreclosure, short sale, or late payments who can’t wait out the usual waiting periods.
Best for: Borrowers who have recovered financially but whose credit history still shows a recent event.
- Some programs allow as little as 1 day after a credit event
- Bigger down payment and higher rate than a standard loan
- Many borrowers refinance into a conventional loan later
We’ll map out when you could move to a lower-rate loan.
Not sure which one fits you?
Tell us a little about your situation. We’ll compare the loans you qualify for side by side and call you with the options. No credit pull for this step.
Thank you for your response. ✨
General information only, not a commitment to lend. Loan programs, down payments, credit requirements, fees, and limits vary by lender and change over time. All loans are subject to credit approval and underwriting. Brave Home Loans, Company NMLS# 1919888.
