Federal Housing Administration (FHA) loans and conventional loans are two frequently compared mortgage options.
Read on to learn which might be right for you.
FHA Loans
FHA loans are issued by banks that are federally approved and insured by the Federal Housing Administration.
The Pros:
- A low downpayment with available assistance for properly credentialed buyers
- A lower minimum credit score
- Provided sooner to those with previous financial hardship
The Cons:
- A 1.75% premium (in addition to the downpayment) at the time of closing
- A monthly insurance fee for a minimum of 11 years
- Strict appraisal standards
- Limited to owner-occupied properties
Conventional Loans
Conventional loans typically require a higher credit score, but they have their own set of advantages.
The Pros:
- No mortgage insurance requirement with a 20% downpayment
- Less strict appraisal criteria
- Usable for investment property
- Fewer processing and inspection hurdles
The Cons:
- Higher credit score requirement
- Personal Mortgage Insurance (PMI) required until loan-to-value ratio reaches 20%
- Higher downpayment requirement