Keywords: FHA; Lown-Income; Conventional; Mortgage Loans.
FHA vs Conventional Loan Types: Which is Right for Me?
An FHA loan allows for lower credit scores and can be easier to qualify for than a conventional loan. However, Conventional loans may not require mortgage insurance with a large enough down payment. The benefit of FHA vs conventional down to the individual needs of the borrower.
Let's take a look at both mortgage types to help you decide what's right for you.
FHA vs Conventional Loans Comparison Chart
|
|
Conventional 97 loan |
FHA loan |
|
Minimum down payment |
3% |
3.50% |
|
Minimum credit score |
620 |
580 |
|
Loan limit for 2021 (in most areas) |
$548,250 |
$356,362 |
|
Income limit |
No income limit |
No income limit |
|
Minimum out-of-pocket contribution |
0% (Down payment and closing costs can be 100% gift funds, grants, or loan) |
0% (Down payment and closing costs can be 100% gift funds, grants, or loan) |
|
Mortgage insurance |
Monthly payments are required if you have a down payment of less than 20%, but generally, the insurance auto terminates when your loan-to-value ratio reaches 78%. |
Upfront and monthly payments, for the duration of the mortgage term, are required. |
FHA vs. Conventional Loans: Key Differences
FHA loans require mortgage insurance regardless of down payment amount, compared to conventional loans where you need mortgage insurance for down payments under 20%. FHA mortgage insurance payments will be the same regardless of your credit score.
FHA Loans
Lower credit scores allowed
More rigid property standards
Somewhat higher down payment needed
Private Mortgage Insurance (PMI) is required for down payments less than 20%
Conventional Loans
Higher credit score needed (at least 620)
Slightly smaller down payments allowed
Private Mortgage Insurance (PMI) is required for down payments less than 20%
More liberal property standards
If you are a first-time home buyer or looking to refinance, you are probably asking yourself these kinds of questions. Different situations require different types of loans. In this article, we will take a look at FHA and Conventional loans. Using examples, this article will give you a better understanding of these two types of loans, their benefits and their drawbacks.
Post time: Jan-20-2022