What Loan Types Will You Work With as a New MLO?

"Helping someone buy a home" looks very different depending on the borrower's credit profile, military service history, property location, and down payment capacity. The mortgage products you work with determine how you serve each client — and understanding the landscape before you start originating gives you a meaningful advantage.

Your pre-licensing courseworkPre License What A Mortgage Licensing Course Teaches You About Real Life Resources introduces these products as part of the required 20-hour curriculum. Here is how they work in practice.

Core Loan Types at a Glance

Loan Type	Backed By	Min. Down Payment	Best For
Conventional	Fannie Mae / Freddie Mac guidelines	As low as 3%	Borrowers with strong credit and savings
FHA	Federal Housing Administration (HUD)	3.5% (580+ credit score)	First-time buyers, lower credit scores
VA	U.S. Department of Veterans Affairs	0%	Eligible veterans, active-duty, surviving spouses
USDA	USDA Rural Development	0%	Income-eligible buyers in rural/suburban areas

Conventional Loans

Conventional loans are the most common mortgage product in the United States. They are not insured or guaranteed by a federal agency — instead, they conform to guidelines set by Fannie Mae and Freddie Mac.

Key characteristics:

• Down payments as low as 3% for certain programs
• Private mortgage insurance (PMI) required when the borrower puts down less than 20%
• PMI can be removed once the borrower reaches 20% equity
• Available for primary residences, second homes, and investment properties
• Competitive interest rates for well-qualified borrowers

As a new MLO, conventional loans will likely make up a significant portion of your business. Learning the nuances of conventional underwriting guidelines is essential.

FHA Loans

FHA loans are insured by the Federal Housing AdministrationHousing Fhahistory Program_offices, part of HUD. This government backing allows more flexible qualifying criteria.

Key characteristics:

• Minimum 3.5% down payment for borrowers with credit scores of 580 or higher
• Borrowers with scores between 500 and 579 may qualify with 10% down
• Both an upfront mortgage insurance premium (UFMIP) and annual MIP are required
• MIP typically remains for the life of the loan (unlike conventional PMI, which can be removed)
• Popular choice for first-time homebuyers with limited savings

Many new MLOs find FHA loans are among the first products they close. First-time homebuyers with limited savings represent a large market segment, and guiding these clients confidently builds your skills and reputation. Understanding what a typical day involvesPre License A Day In The Life Of A Mortgage Loan Originator Resources helps you see how product knowledge connects to client conversations.

VA Loans

VA loans are guaranteed by the U.S. Department of Veterans AffairsHome Loans Housing Assistance and offer some of the most favorable terms in mortgage lending.

Key characteristics:

• Zero down payment required
• No private mortgage insurance
• Competitive interest rates
• VA funding fee required (varies by service history, down payment, and prior usage; can be financed into the loan)
• Available to eligible active-duty service members, veterans, and certain surviving spouses

Developing expertise in VA loans can be a powerful niche. Military families value originators who understand the unique aspects of VA lending. The specialized knowledgePre License How Mortgage Loan Originators Thrive In A Competitive Market Resources required creates a competitive advantage.

USDA Loans

USDA loans are backed by the U.S. Department of Agriculture's Rural Development programSingle Family Housing Programs Single Family Housing Guaranteed Loan Program Programs Services. Despite the name, these are not limited to farmland.

Key characteristics:

• Zero down payment
• Below-market interest rates for eligible borrowers
• Income limits apply (vary by area and household size)
• Properties must be in USDA-eligible rural or suburban areas (which cover a surprisingly large portion of the country)
• Upfront guarantee fee and annual fee required, though typically lower than FHA premiums

For MLOs working outside major metros, USDA loans can be a significant part of business.

Non-QM and Specialty Products

Beyond the four core types, the market includes non-qualified mortgages (non-QM) for borrowers who do not fit standard guidelines:

• Bank statement loans: For self-employed borrowers using bank deposits instead of tax returns
• Investor loans: For real estate investors purchasing rental properties
• Foreign national loans: For non-U.S. citizens purchasing property

Most new MLOs will not originate non-QM loans immediately, but knowing they exist prepares you for borrower conversations. Your NMLS exam preparationPre License Is The Nmls Exam Hard What To Know Before You Start Studying Resources covers non-traditional lending as part of the required curriculum.

Why Product Knowledge Matters

Knowing your products directly affects your ability to help borrowers and close loans:

• Client with a 620 credit score and 3.5% down? Likely an FHA candidate.
• Veteran asking about zero-down options? VA loan program.
• Buyer in a rural area with moderate income? Check USDA eligibility.
• Borrower outside traditional guidelines? Explore non-QM options.

The MLOs who build the strongest reputations are the ones who can quickly assess a situation and recommend the right product. This skill comes from combining your educationPre License Understanding Pre Licensing And Continuing Education Requirements For Mortgage Careers Resources with practical experience.

Get Ready to Serve Every Borrower

Your mortgage education is the foundation for product expertise that grows throughout your career. Aceable Mortgage's pre-licensing courses cover the loan types, underwriting concepts, and federal regulations you need to understand before you start working with borrowers. Start your path into the mortgage industryPre License Breaking Into The Mortgage Industry Resources with the knowledge that makes you effective from day one.