ARM, Fixed, Jumbo, Conventional: What Do These Mortgage Terms Actually Mean?

You want to buy a home in Maine or New Hampshire. You start researching loans. Suddenly, you’re drowning in alphabet soup: ARM, FHA, VA, USDA. The mortgage industry loves jargon. But you need clarity, not confusion.

This guide cuts through the noise. You’ll learn what these terms mean in plain English. You’ll understand which loan fits your situation. You’ll gain the confidence to talk to lenders without feeling lost.

By the end of this article, you’ll know the difference between fixed and adjustable rates. You’ll understand conventional versus government-backed loans. You’ll see which options make sense in today’s Maine and New Hampshire markets.

Fixed vs Adjustable-Rate Mortgages (ARMs)

Your mortgage rate determines how much you pay every month. The big choice: fixed or adjustable?

Fixed-Rate Mortgages: Stability You Can Count On

A fixed-rate mortgage locks your interest rate for the entire loan term. Get 6.85% today, pay 6.85% for 30 years. Your principal and interest payment never changes.

Most Maine and New Hampshire buyers choose 30-year fixed loans. Some opt for 15-year terms to build equity faster and pay less interest overall, but with higher monthly payments.

Fixed rates make sense when you:

  • Plan to stay in your home long-term
  • Want predictable payments
  • Prefer peace of mind over potentially lower initial rates

As of June 2025, 30-year fixed rates in Maine and New Hampshire average 6.9%, according to Mortgage News Daily.

Adjustable-Rate Mortgages: Lower Rates Now, Uncertainty Later

ARMs start with a fixed rate for a set period — typically 5, 7, or 10 years. After that, rates adjust periodically based on market indexes.

The initial rate on ARMs runs about 0.5-0.75% lower than fixed rates. On a $400,000 loan, that could save you $125-$190 monthly during the fixed period. 

Jim Lee, a New Hampshire real estate expert, notes: 

“Between elevated home prices and today’s mortgage rates, many buyers are looking for ways to stretch their budgets. ARMs offer lower initial payments, helping buyers qualify for more expensive homes in competitive markets like Portsmouth.”

ARMs make sense when you:

  • Plan to move before the fixed period ends
  • Expect to refinance within a few years
  • Can handle payment increases if rates rise

For most Maine and New Hampshire buyers in 2025, fixed-rate mortgages offer valuable stability. However, ARMs deserve consideration if you’re buying a starter home you’ll outgrow in 5-7 years.

What is a Conventional Loan?

A conventional loan is simply a mortgage not backed by the government. Private lenders offer these loans, and they follow rules set by Fannie Mae and Freddie Mac — the government-sponsored enterprises (GSEs) that play a crucial role in the U.S. housing finance system.

Most Maine and New Hampshire homebuyers use conventional loans. They’re versatile, widely available, and often have competitive rates.

Conventional loan requirements vary by lender, but typically require:

  • Usually a minimum credit score of 620 (though 660+ gets better rates)
  • Down payment of at least 3% (20% avoids private mortgage insurance)
  • Debt-to-income ratio under 45% in most cases

For 2025, conforming loan limits are:

  • Maine and most New Hampshire counties: $806,500 for single-family homes
  • Rockingham and Strafford Counties, NH: $914,250 for single-family homes

These limits increased 5.2% from 2024, reflecting rising home prices across New England, according to the Federal Housing Finance Agency.

CU Promise: A Flexible Conventional Option

CUSO Home Lending offers a standout conventional option called the CU Promise Loan. This program features:

  • No private mortgage insurance with just 10% down
  • More flexible credit requirements than standard conventional loans
  • Local underwriting for faster approvals

What is a Jumbo Loan?

A jumbo loan exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. In 2025, that means loans over $806,500 in most Maine and New Hampshire counties, you’ll need a jumbo loan when buying:

  • Luxury waterfront properties in coastal Maine or New Hampshire
  • Large homes in affluent areas like Portsmouth, Rye, Cape Elizabeth, or Kennebunkport

The median home price in Maine hit $415,800 in early 2025 while New Hampshire’s reached $487,700, according to Bankrate. But coastal and luxury markets often see prices well above $1 million.

Jumbo loans have stricter requirements and vary by lender:

  • Higher credit scores (typically 700+)
  • Larger down payments (often 20% minimum)
  • Lower debt-to-income ratios (usually under 43%)
  • More cash reserves (6-12 months of payments)

The trade-off? Interest rates on jumbo loans are typically higher than conforming loans – but not always. Check with an experienced lender like CUSO to get the most up-to-date information on Jumbo loan rates and requirements.

FHA, VA, and USDA Loans (Quick Primer)

Not all mortgages come from private lenders. The government backs several loan programs designed for specific groups of buyers.

FHA Loans: Lower Barriers to Entry

The Federal Housing Administration insures these loans, reducing risk for lenders. This translates to more flexible terms for you:

  • Down payments as low as 3.5% with credit scores of 580+
  • Higher debt-to-income ratios allowed (often up to 50%)
  • More forgiving credit history requirements

The trade-off? Mandatory mortgage insurance premiums for the life of the loan in most cases.

VA Loans: Benefits for Those Who Served

If you’re a veteran, active-duty service member, or surviving spouse, VA loans offer unbeatable benefits:

  • No down payment required
  • No private mortgage insurance
  • Competitive interest rates
  • More flexible credit requirements

USDA Loans: Rural and Suburban Opportunities

The USDA Rural Development program backs these loans for properties in eligible areas:

  • No down payment required
  • Lower mortgage insurance than FHA
  • Income limits apply 

“Rural” is broader than you might think. Many Maine and New Hampshire suburbs qualify for USDA financing. According to Society Mortgage, USDA loans in 2025 typically require a minimum credit score of 620.

For a full breakdown of programs for first-time buyers, click here.

How to Choose the Right Loan for You

No single mortgage works for everyone. Your perfect loan depends on your financial situation, goals, and timeline. But you can start by asking yourself these key questions:

  1. How long will you stay in this home?
    • Less than 7 years? Consider an ARM for lower initial payments
    • 7+ years? A fixed-rate loan provides long-term stability
  2. How much can you put down?
    • Less than 3%? Explore FHA or VA (if eligible)
    • 3-10%? Consider conventional with PMI or CUSO’s CU Promise
    • 20%+? You’ll qualify for the best conventional rates with no PMI
  3. What’s your credit situation?
    • Below 620? FHA may be your best option
    • 620-680? FHA or Conventional is possible but with higher rates
    • 680+? You’ll qualify for competitive conventional rates
  4. How much house do you need?
    • Above conforming limits? You’ll need a jumbo loan
    • Within conforming limits? Conventional offers the most flexibility
    • Modest home in rural/suburban area? USDA might offer no down payment
  5. Are you a first-time buyer?

The “best” mortgage is the one that helps you buy a home you can comfortably afford, with terms that match your financial situation and future plans.

Trusted Resources

When navigating mortgage options, reliable information matters. These resources provide trustworthy guidance:

FAQ: Your Questions Answered

Is an ARM or fixed rate better in 2025?

For most Maine and New Hampshire buyers in 2025, fixed rates offer valuable stability. With rates projected to decrease slightly later this year, locking in now protects you if predictions prove wrong. ARMs make sense if you’ll move within 5-7 years or expect significant income growth before the adjustment period.

Do jumbo loans require higher credit scores?

Yes. While conventional loans typically require minimum scores of 620, jumbo loans generally demand 700+. Some lenders require 720 or even 740 for the best rates. Jumbo loans also typically require larger down payments (often 20%+) and more cash reserves.

Is CU Promise better than FHA?

It depends on your situation. CU Promise offers no PMI if you put at least 10% down, potentially saving you hundreds monthly compared to FHA’s permanent mortgage insurance. However, FHA may accept lower credit scores and higher debt-to-income ratios.

What’s the minimum down payment for a conventional loan?

Conventional loans require as little as 3% down for first-time buyers through programs like Fannie Mae’s HomeReady or Freddie Mac’s Home Possible. Most conventional loans require 5% minimum for repeat buyers. Remember that putting less than 20% down typically requires private mortgage insurance (PMI), adding to your monthly payment.

How do I know which mortgage term is right for me?

Choose your mortgage term based on your financial goals. A 30-year term offers lower monthly payments but costs more in total interest. A 15-year term builds equity faster and saves on interest but requires higher monthly payments. Your decision should balance monthly affordability with long-term financial goals.

For additional help, review our article on how to choose between fixed and variable-rate mortgages.

Mortgage terminology can overwhelm even the most prepared homebuyer. 

ARM, FHA, jumbo, conventional — these terms matter for your financial future, but they shouldn’t stand between you and your dream home. 

While this guide explains the basics, nothing replaces personalized guidance. A CUSO loan officer can translate these concepts into solutions that fit your unique situation. They know Maine and New Hampshire markets, understand local programs, and can explain options in plain English. 

Skip the jargon jungle. Start with a conversation with a CUSO loan officer who puts your needs first.

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