"General Mortgage Knowledge" is one of the five domains on the SAFE MLO exam, and a chunk of it comes down to knowing what actually separates the major loan categories a borrower might qualify for. The specific numbers below (credit scores, down payments) are lender overlays and program guidelines that can shift over time and by lender — treat them as general, currently reported ranges rather than fixed law, and always confirm current figures against the relevant agency's own published guidelines. The structural differences between the programs, on the other hand, are stable and worth knowing cold.
Conventional loans
A conventional loan is any mortgage not insured or guaranteed by a federal agency. Most conventional loans are underwritten to standards set by Fannie Mae or Freddie Mac so they can be sold on the secondary market, though "non-conforming" conventional loans (including jumbo loans that exceed the conforming loan limit) also exist. Conventional loans generally require a higher minimum credit score than government-backed programs, and a down payment that can run from roughly 3% up to 20% or more. If a borrower puts down less than 20%, the lender typically requires private mortgage insurance (PMI), which can usually be cancelled once the borrower builds enough equity — unlike the mortgage insurance on some government-backed programs, discussed below.
Related: What to Expect on the NMLS SAFE MLO Exam
FHA loans
FHA loans are insured by the Federal Housing Administration, part of HUD, meaning the government insures the lender against loss rather than making the loan directly. This makes FHA loans more accessible to borrowers with lower credit scores or limited down payment funds, generally allowing a low down payment for borrowers with qualifying credit scores. The tradeoff is mortgage insurance premiums (MIP), which — unlike conventional PMI — often can't be cancelled simply by reaching a certain equity level and may last for the life of the loan depending on the down payment and loan term.
VA loans
VA loans are guaranteed by the Department of Veterans Affairs and are available to eligible active-duty service members, veterans, and certain surviving spouses. Their defining feature is that qualified borrowers can finance with no down payment and no monthly mortgage insurance, which is unusual among major loan categories. VA loans do involve a one-time funding fee (with some borrowers, such as those receiving VA disability compensation, exempt from it), and the VA does not set a hard minimum credit score itself — individual lenders set their own credit overlays for VA loans.
USDA loans
USDA loans are guaranteed by the U.S. Department of Agriculture and are designed to support homeownership in eligible rural and certain suburban areas, not just farmland despite the department's name. Like VA loans, USDA loans can offer 100% financing with no down payment for eligible borrowers, but they add two other eligibility layers most other programs don't have: the property must be located in a USDA-eligible area, and the borrower's household income must fall under the program's income limits for that area (commonly expressed as a percentage of the area's median income).
How the exam tends to test this
- Know which agency stands behind each program: FHA insures, VA guarantees, USDA guarantees, and conventional loans carry no federal backing at all
- Know which programs have property or income eligibility restrictions beyond the borrower's own finances (USDA's location and income limits are the standout case)
- Know the general mortgage insurance distinction between conventional PMI (cancellable) and FHA MIP (often not cancellable without refinancing)
- Don't memorize a single "passing" number for credit score or down payment for any program — expect exam language like "generally" or "typically," and don't be thrown by a specific lender's stricter overlay appearing in a scenario question