FHA vs. CONVENTIONAL

What loan program is right for you?

A knowledgeable mortgage loan originator can help you choose the perfect program for your individual situation. Below are the highlights and pros and cons for FHA vs. Conventional loans.

FHA

This popular first time home buyer loan is open to any applicant who is buying a primary residence. It’s popular, because traditionally it allows for lower credit scores and higher debt.

The guidelines for this type of mortgage are more flexible than other types of loans.  However, the mortgage insurance is usually more expensive and remains for the life of the loan.

  • 3.5% down payment
  • Loan up to $345,000
  • Owner occupied
  • 2-unit properties allowed
  • Higher debt to income ratio allowed
  • More lenient guidelines for qualifying
  • Credit scores as low as 580 (with 10% down)
  • Gift funds allowed
  • Seller contributions up to 6%
  • Mortgage insurance is for the life of the loan

Conventional

Conventional, also known as Fannie Mae or Freddie Mac, loans are best known for buyers putting 20% or more down, because they can avoid mortgage insurance. These days conventional offers much more.

  • Loan amount up to $417,000 or high of $424,100
  • Owner occupied, second home, or investment
  • Down payment 5% -20% with mortgage insurance
  • As low as 3% down program available
  • Credit 620+
  • Single family, planned unit development (HOA), or approved condo
  • Rates may be higher depending on credit and down payment
  • Mortgage insurance may be lower
  • Seller contributions allowed
  • Gifts allowed
  • Conservative guidelines

The comparison comes down to, which you qualify for and what the total payment is.

So many buyers think of only, “What is my rate?” After closing, though, they only remember what their payment is.  You may get a lower payment with a higher rate under the right program and mortgage insurance. Be sure to compare.

Both FHA and Conventional mortgage programs have a lot to offer, depending on your specific needs.