What Are the Different Types of Home Loans Available to San Jose Buyers?

Explore the different home loans available in San Jose—from FHA and VA to jumbo loans and fixed vs. ARM options. Choose the best mortgage for your needs.

Picking the Right Mortgage in San Jose’s High-Stakes Market

Buying a home in San Jose isn’t just about finding the right property—it’s also about choosing the right loan. With high home prices and competitive offers, selecting the best mortgage product can mean the difference between winning your dream home and falling short.

But with so many options—conventional, FHA, VA, jumbo, fixed-rate, adjustable-rate—it can be overwhelming to figure out where to start.

This guide breaks down the most common types of home loans available to San Jose buyers, including key pros and cons of each, so you can make an informed decision based on your budget, credit profile, and long-term goals.

1. Conventional Loans

Best For: Buyers with good credit and solid financials

Conventional loans are the most widely used mortgage type in the U.S. They are not backed by the federal government, and are typically issued by private lenders such as banks or credit unions.

Features:

• Usually require 5%–20% down payment

• Minimum credit score of 620+

• May require private mortgage insurance (PMI) if down payment is less than 20%

Pros:

• Flexible loan terms (15, 20, or 30 years)

• No upfront mortgage insurance fee (unlike FHA)

• PMI can be removed once you hit 20% equity

Cons:

• Stricter credit and income requirements

• PMI adds to monthly payments if applicable

In San Jose, conventional loans work well for buyers with strong credit and enough savings for a sizable down payment.

2. FHA Loans (Federal Housing Administration)

Best For: First-time or lower-income buyers

FHA loans are backed by the federal government and designed to make homeownership more accessible.

Features:

• Minimum 3.5% down payment

• Credit scores as low as 580

• Upfront and annual mortgage insurance premiums (MIP) are required

Pros:

• Easier qualification for buyers with lower credit or limited savings

• Allows for higher debt-to-income (DTI) ratios

Cons:

• MIP is required for the life of the loan (unless refinanced)

• Loan limits are capped (as of 2025, the FHA limit for Santa Clara County is approx. $1.15 million)

Because San Jose homes tend to exceed FHA loan limits, this option is best for entry-level buyers or condos under $1.15M.

3. VA Loans (Veterans Affairs)

Best For: Eligible military service members, veterans, and surviving spouses

VA loans are backed by the Department of Veterans Affairs and offer some of the most generous mortgage terms available.

Features:

• 0% down payment

• No private mortgage insurance (PMI)

• Must meet service eligibility requirements

Pros:

• No down payment required

• Lower interest rates compared to conventional loans

• Flexible credit and income requirements

Cons:

• Requires a VA funding fee, typically 1.4%–3.6% of the loan amount

• Limited to eligible buyers only

VA loans are a powerful option in San Jose’s expensive market for those who qualify—especially with no down payment required.

4. Jumbo Loans

Best For: High-income buyers purchasing luxury or high-priced homes

A jumbo loan is used to finance homes that exceed conforming loan limits set by Fannie Mae and Freddie Mac. In Santa Clara County, the 2025 conforming limit is roughly $1,149,825—anything above that is considered a jumbo loan.

Features:

• Typically requires 10%–20% down payment

• Higher credit score requirement (often 700+)

• Lower debt-to-income ratio needed

Pros:

• Enables purchase of high-end or luxury homes

• More flexible property types (multi-family, large estates)

Cons:

• Tougher qualification standards

• Higher interest rates and larger monthly payments

In San Jose, where the median home price exceeds $1.3 million, jumbo loans are a necessity for many buyers.

5. Fixed-Rate Mortgages

Best For: Buyers who want predictable payments

A fixed-rate mortgage means your interest rate—and your monthly principal and interest payments—stay the same over the life of the loan.

Features:

• Common terms: 15, 20, or 30 years

• Available for conventional, FHA, VA, and jumbo loans

Pros:

• Consistent monthly payments

• Easier to budget long-term

• Protection from rising interest rates

Cons:

• May start at higher rates than adjustable options

• Less flexible if you plan to move within a few years

Fixed-rate mortgages are a great choice for buyers who plan to stay put long-term or want financial predictability.

6. Adjustable-Rate Mortgages (ARMs)

Best For: Buyers who plan to sell or refinance within a few years

ARMs start with a lower interest rate for a set period—usually 5, 7, or 10 years—after which the rate adjusts annually based on market conditions.

Features:

• Common types: 5/1 ARM, 7/1 ARM

• Rate is fixed for initial period, then adjusts yearly

Pros:

• Lower initial monthly payments

• Good option for short-term ownership

Cons:

• Risk of higher payments after the fixed period

• Less financial certainty over time

In San Jose, ARMs are attractive for tech professionals or families who plan to relocate or upgrade within a few years.

7. Local and State Homebuyer Assistance Programs

California and the Bay Area offer several programs to help with affordability:

CalHFA (California Housing Finance Agency):

• Offers down payment assistance and low-interest loans

• For first-time homebuyers with income caps

• Can be used with FHA or conventional loans

Santa Clara County Programs:

• Empower Homebuyers SCC offers shared equity loans for middle-income first-time buyers

• Below Market Rate (BMR) housing programs available through local cities

These programs may not apply to every buyer, but they can unlock homeownership for those priced out by San Jose’s high costs.

Choosing the Right Loan for You

When selecting a mortgage, consider these questions:

• What’s my budget for monthly payments?

• How long do I plan to stay in the home?

• Do I have savings for a large down payment?

• How’s my credit score and debt-to-income ratio?

• Am I eligible for VA or local assistance programs?

Your answers will guide you toward the loan product that fits your lifestyle, goals, and financial reality. And of course, work with a knowledgeable lender who can present side-by-side comparisons based on real numbers—not just general advice.

San Jose Buyers Have More Loan Options Than You Think

San Jose’s real estate market might feel intimidating, but when it comes to mortgage options, you’re not stuck with a one-size-fits-all solution. From fixed conventional loans to flexible ARMs, or jumbo mortgages to VA benefits, there’s a loan structure to match nearly every situation.

The key? Know your numbers, understand your goals, and partner with a great agent and lender who can guide you through every step of the financing process.