By Micah Heath · 9 min read · Updated July 3, 2026
Four common loan types, in plain English — what each one is good at, what it costs, and where it fits around Bloomington.
There's no 'best' loan — there's the one that fits your down payment, your credit, and where you're buying. Here's the honest version of each, plus the decision logic we actually walk buyers through.
Conventional
- Not government-backed; the workhorse for buyers with solid credit
- As little as 3% down for qualified first-time buyers; 20% down avoids PMI entirely
- PMI (when you're under 20% down) drops off as equity builds — unlike FHA's insurance
- Best pricing generally goes to higher credit scores and lower loan-to-value
FHA
- Government-backed, friendlier on credit history and higher debt-to-income ratios
- 3.5% minimum down
- Mortgage insurance runs for the life of most FHA loans today — refinancing later is the usual exit
- Slightly stricter property-condition standards at appraisal; sellers know this
VA
- For eligible veterans, service members, and some surviving spouses
- Often zero down and no monthly mortgage insurance — usually the strongest deal available if you qualify
- A one-time funding fee applies for most borrowers (waived with qualifying disability ratings)
- Assumable by a future qualified buyer — a low-rate VA loan can become a selling point later
USDA
- Zero down for homes in USDA-eligible rural areas, with household income limits
- This is the overlooked one around here: much of Owen, Lawrence, and Greene County territory qualifies even when in-town Bloomington doesn't
- Carries its own guarantee fees — smaller than most people assume; have a lender price it side-by-side
What the down payment actually changes
Illustrative math — cash to get in the door on a $250,000 home
3% down (conventional first-time) → $7,500 down
3.5% down (FHA) → $8,750 down
20% down (no PMI) → $50,000 down
PMI if you put 10% down instead: $225,000 loan × 0.6%/yr (example PMI rate) ≈ $113/mo
Percentage arithmetic at example figures; closing costs are separate and PMI pricing varies with credit and loan type. The point: waiting years to save 20% often costs more than paying PMI while you build equity — but it's your math, and we'll run it honestly.
The decision logic, plain-spoken
- Eligible for VA? Start there — it's usually hard to beat.
- Flexible on location and income-eligible? Price USDA in Owen, Lawrence, or Greene before ruling out zero-down.
- Solid credit and some savings? Conventional usually wins on total cost, because its insurance is removable.
- Thinner credit file or higher DTI? FHA exists exactly for you — plan the refinance exit from day one.
Tell me your situation and I'll tell you which doors it opens — and connect you with local lenders who'll price two or three of these side by side, in writing.
Want the real number on your situation?
Tell us what you're working with and a local agent will run the actual figures with you — no cost, no pressure.