Are you planning on buying a house soon? Perhaps it’s the first time you’ve thought about embarking on the journey to home ownership.

Creating the path to owning that piece of property you’ve always wanted can seem like an intimidating venture. One of the first steps is knowing the mortgage options available to you.

If you’re wondering which types of home loans will best suit you, read on. Find out which mortgage option is right for you by comparing FHA vs conventional loan.

Let’s get into it!

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Credit Score Requirements

FHA loans generally require a lower credit score than conventional loans. The required minimum credit score for FHA is 500, while conventional loans typically require a score of 620 or higher.

Additionally, borrowers of FHA loans may be able to put down a much lower down payment than they would need to make to qualify for a conventional loan. In some instances, mortgage insurance costs are lower with an FHA loan than a conventional loan.

While FHA loans are typically easier to qualify for, they may come with more fees than a conventional loan. The best option for a borrower will depend on their financial situation, credit score, and credit history.

Down Payment Requirements

FHA loans require a minimum down payment of 3.5 percent, while conventional loans require 5 percent. However, there are flexible options for hard-working individuals who are unable to save the required 5% for a conventional loan.

Both FHA and conventional loans have their advantages, however, the down payment requirements of an FHA loan can offer more flexibility to potential buyers who may not qualify for a conventional loan.

These options come at a cost, as the interest rates of FHA tend to be higher than those of conventional loans. 

Insurance Premiums

In terms of insurance premiums, an FHA loan can typically provide lower monthly premiums. This is because they are backed by the FHA, which allows the lender to request a lower high upfront MIP.

However, with a conventional loan, the homeowner may be able to partake in PMI, which can provide some of the same benefits and require a lower MIP payment.

Loan Limits

The FHA and conventional loan programs both have maximum loan size limits. FHA limits are based on the county and may range from $275,000 to $721,050 depending on where the property is located.

Conversely, conventional mortgage loan limits are higher, ranging from a maximum loan size of up to $726,525. Both types of loans can provide great financing options, but you should research both to make sure that the loan limit matches your needs.

It would be wise to research the specific loan limits in the county in which you are looking for a house before you make a decision. 

Loans come down to an individual’s unique financial situation so it’s best to discuss all the options with an hud consultant before making an informed decision.

Key Differences Between FHA vs Conventional Loan

The differences between these loans depend on your needs and finances. FHA loans often require a lower down payment, but have strict qualifications, while conventional loans are easier to qualify for, but have higher credit standards.

Ultimately, taking the time to compare FHA vs conventional loan can help you make the best decision for your situation. To get started, consult with a loan officer today to determine the right option for you.

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