FHA vs. Conventional Loans

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 FHA.

 

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

 

Knowing your loan options will better inform your decisions as a buyer. For more information concerning FHA and conventional loans, contact us!