The Loan Types Every Buyer Should Understand (And When Each Makes You the Most Money)

By Ray Grewe - NMLS #1031099

Buying a home is one of the biggest financial moves most people make, finding the right house is important, but arguably not as important as finding the correct loan. Most buyers never realize how much money is won or lost simply by choosing the right loan. The difference can be tens of thousands of dollars over the life of the mortgage (sometimes more).

When you understand how each loan works, and when it strategically benefits you, you can make a choice that aligns with your goals, financial needs, and overall wealth.

Let's break it all down in a way that's clear, simple, and built on real Maryland and Baltimore experience.

Why It Matters

Two buyers can purchase the exact same home but end up with very different outcomes:

One pays more mortgage insurance than they need to.
One misses out on a lower down-payment option that could've preserved cash for upgrades or emergencies.
One chooses a loan that limits future refinancing power.
One picks a loan that creates instant equity.

Your mortgage isn't just a loan it's a vehicle to a goal. Choosing the right one is how you start strong.

Conventional Loans

What It Is

The most common mortgage type, offered through private lenders and backed by Fannie Mae/Freddie Mac.

Who Can Use It

Buyers with stronger credit
Anyone putting 3 - 20% down.
Borrowers who want flexible terms and faster PMI removal.

When It Makes You the Most Money

When you are making large down payments 10-20% down
When you expect to remain in the same loan for a long period of time

When It's (usually) Not the Right Choice

When you plan on refinancing in the near future
When you are looking to maximize your purchasing power
When you need flexible underwriting

Real Baltimore Example

A buyer purchasing a $450,000 single family home in Catonsville with 10% down paid a few hundred dollars less per month with their reduced PMI over the mortgage insurance on government insured loans.

FHA Loans

What It Is

A government-backed loan designed to help more buyers qualify with flexible credit and income guidelines.

Who It Benefits

Buyers with lower credit scores.
Buyers with limited down payment savings.
Anyone who is looking for lower interest rates to keep payments low as they get into a property.

When It Makes You the Most Money

When preserving cash is more important than minimizing mortgage insurance.
When you want a pathway into a home now instead of waiting years to "perfect" your credit.
When house hacking or renovating makes more sense than paying rent.
Great for multi-family purchases
Pairs very well with down-payment assistance like Baltimore's Buy Back the Block Program

Local Example

A Baltimore buyer purchasing a two unit multi-family home in Charles Village with 3.5% down used FHA and received a grant from Baltimore City to cover the down payment. They used the money that they saved on the down payment to renovate a basement and created a third unit. This created more cashflow covering their month-to-month mortgage payment while they lived in one of the units.

VA Loans

What It Is

A loan guaranteed by the Department of Veterans Affairs for eligible buyers. That offers a zero down payment option with no mortgage insurance.

Who It Benefits

Veterans
Active-duty service members
Qualified surviving spouses

When It Makes You the Most Money

Zero down + no mortgage insurance = massive savings.
Perfect for duplexes, triplexes, and fourplexes.
Creates incredible leverage, especially in rising markets.

Local Scenario

A veteran purchased a duplex for $600,000 near Ft. Meade with 0% down. The rental income covered over half the monthly payment - a wealth-building move renters rarely realize is possible. They later took advantage of the VA's rate reduction program to reduce their rate after they lived in the home.

USDA Loans

What It Is

A zero-down loan for eligible rural and suburban areas.

Who It Benefits

First-time buyers who want affordability and space.
Buyers open to areas outside the city center.
Borrowers who are below the area median income.

When It Makes You the Most Money

Zero down frees up cash for moving, repairs, or emergency savings.
Lower insurance means lower monthly payments.
USDA areas often offer more house for the dollar.

Local Example

Parts of Harford, Carroll, and Cecil counties qualify making USDA one of the most underrated paths into homeownership for Maryland buyers.

203k Renovation Loans (FHA)

What It Is

A renovation loan that finances both the purchase and repairs into one mortgage.

Who It Benefits

Buyers targeting Baltimore homes that need love.
Those who want to create instant equity.
Investors and house hackers who prefer value-add opportunities.

When It Makes You the Most Money

When you buy a lower-priced home and renovate into a higher value.
When you are ready to undertake a project with a hands on approach.
When you want to roll renovation costs into a low-interest mortgage instead of using high-interest credit.

Example

A buyer in Hamden wants to purchase a home and make it unique theirs. They purchase the house with an FHA 203k for $200,000 with the help of a licensed contractor they put a renovation into the house totaling $90,000. After the renovations were completed, they moved into the house now worth $425,000 and only spent $290,000.

Fix and Flip

What They Are

Loans created for investors who's goal is to purchase, renovate, and sell a property in a short period of time.

Who They Benefit

Investors looking to quickly turn a property over.
Experienced Investors.
Investors who don't want income documentation headaches.

When They Make You the Most Money

When there is a plan in place to renovate and exit the property.
They can be paired with DSCR loans for renovation to hold.
When you need lower cost to enter an investment purchase.

Real Investor Scenario

An investor in Gwyn Oakes purchases a single-family home that had not been remodeled since the 80's. They purchased the home for $180,000 and partnered with a contractor to add $120,000 in renovations to the property. They sold the property six months later for $435,000.

DSCR & Investor Loans

What They Are

Loans created for investors where approval is based on rental income, not personal income.

Who They Benefit

Investors building portfolios.
BRRRR buyers.
Landlords who don't want income documentation headaches.

When They Make You the Most Money

When the rental income covers the payment (cash-flow positive).
When tax write offs make traditional qualification harder.

Real Investor Scenario

A buyer picked up a rental in Park Heights using DSCR, the property paid for itself from Day One, and they didn't need to show personal tax returns to qualify.

How to Choose the Right Loan for You

Here's a simple guide:

First-time buyer with limited cash: FHA or USDA
Strong credit and solid down payment: Conventional
Veteran or active-duty: VA (almost always your strongest play)
Buying a fixer: 203k
Investment Renovation: Fix and Flip
Investor / landlord: DSCR
Want to house hack: FHA or VA (multi-unit options)

The most important thing to keep in mind is your goals, timeline, and strategy matter just as much as your numbers.

That's where real guidance makes all the difference.

Final Thoughts

Choosing the right loan is more than a checkbox, it's a strategy. And when you approach it strategically, you build wealth faster and start homeownership from a position of strength.

If you want to explore which loan fits your goals, your timeline, and your financial plan, I'm here to help you run the numbers and choose the smartest path forward.

You don't have to figure this out alone and you deserve a strategy that sets you up to win.

Whenever you’re ready, we can walk through your options together.