Learning path
Buying basics: mortgage types in the US and Canada
Mortgages are not one-size-fits-all. This overview explains common loan and product categories in the United States and Canada so you can ask better questions of lenders. We do not list today’s interest rates — those change constantly. Always verify eligibility, fees, and qualifying rules with licensed professionals and official agency sources.
United States — common mortgage types
The CFPB groups many home loans as conventional, government-backed, or special programs. A short orientation:
Conventional
A conventional mortgage is not insured or guaranteed by FHA, VA, or USDA. Many follow guidelines used by Fannie Mae and Freddie Mac (conforming loans). Borrowers who put down less than 20% often pay private mortgage insurance (PMI) until equity reaches lender thresholds. Credit, income, and down payment standards can be stricter than some government-backed options.
FHA
FHA loans are issued by approved lenders and insured by the Federal Housing Administration (part of HUD). They are designed to expand access for borrowers who may have smaller down payments or credit profiles that do not meet every conventional guideline. HUD guidance describes a common minimum required investment of 3.5% for borrowers meeting applicable credit thresholds — confirm current handbook rules with your lender.
VA
VA-backed purchase loans are available to eligible veterans, service members, and certain surviving spouses. A private lender funds the loan; the U.S. Department of Veterans Affairs guarantees a portion. Many eligible borrowers can purchase with no down payment, subject to entitlement, lender overlays, and property requirements. Check VA housing assistance for eligibility basics.
USDA
USDA rural housing programs serve eligible low- to moderate-income buyers purchasing in qualifying areas. Some guaranteed loans allow zero down payment when income, location, and property rules are met. Use USDA’s official eligibility tools and a participating lender to confirm whether a property qualifies.
Canada — fixed, variable, insurance, and the stress test
Fixed vs variable
A fixed-rate mortgage keeps the same interest rate for the term you choose. A variable-rate mortgage can move when the lender’s prime rate changes, which may change your payment or how quickly you pay down principal — depending on the product. FCAC explains both structures; ask your lender how payment adjustments work on their specific product.
CMHC-insured mortgages
When your down payment is less than 20% of the home’s purchase price, Canadian lenders generally require mortgage loan insurance. CMHC (and other insurers) protect the lender if you default. Insurance premiums and eligibility rules — including purchase-price limits and minimum down payment tiers — are set by program and change over time. Confirm current requirements on CMHC and FCAC pages; do not rely on informal social posts for premium percentages.
The mortgage stress test
Federally regulated lenders must qualify most new borrowers at a minimum qualifying rate higher than the contract rate. According to the Office of the Superintendent of Financial Institutions (OSFI), the current minimum qualifying rate for uninsured mortgages is the greater of the contract rate plus 2% or 5.25% (floor and buffer reviewed at least annually). A similar stress-test approach applies to insured mortgages under federal policy. Provincially regulated lenders may follow different rules. OSFI does not expect the MQR for certain uninsured “straight switches” at renewal with no increase in loan amount or amortization — verify with your lender.
Notes for newcomers
Newcomers often need extra time to build a local credit file, document foreign income, and learn whether CMHC-insured products, FHA/VA/USDA options, or conventional loans fit their situation. Start with credit report access and a HUD-approved counselor (US) or FCAC education tools (Canada) before comparing lender products.
Educational content only — not financial, legal, or tax advice. Rates, caps, and qualifying floors change; check OSFI, CMHC, HUD, VA, USDA, and CFPB for current rules.