Government Insured

Conventional loans are not insured or guaranteed by the federal government. This mortgage type adheres to the guidelines set by Fannie Mae and Freddie Mac.

FHA loan is one of several government-insured/backed loans.

Credit Score

Having a good credit score is important for both loan types. Lenders are sometimes less stringent with your credit for FHA loans.  Regardless of your actual credit, lenders typically require a credit score of at least 620 for qualification for all loans.

Down Payment

If you get a FHA loan there is a 3.5% minimum down payment requirement.  These funds may be gifted from a family member of borrowed through a secured loan.  The minimum down payment for Conventional financing is 3% but this must be from the Borrower’s own savings.  This is one of the key differences between the mortgages that make people consider an FHA loan over a conventional.

Fixed/ Adjustable Rates

Both Conventional and FHA loans offer a wide variety of Fixed and Adjustable Rate Mortgages.  Please consult our mortgage professionals to ascertain which is best suited for your needs.

Mortgage Insurance Premium

FHA financing requires the borrower to pay both an upfront mortgage insurance premium, which may be financed, and monthly mortgage insurance premiums, which are escrowed with the principle and interest payments.

If your down payment is equal to or greater than 20% of the sales price, you will not be required to pay mortgage insurance for Conventional financing.  For down payments less than 20% , the amount of mortgage insurance varies with the amount of down payment.  The mortgage premiums may, under certain circumstances, be financed in the loan.  The premium may be paid monthly or in a lump sum at the time of closing.  Please consult our mortgage professionals to ascertain which is best suited for your needs.

We hope this article will help you understand the differences between these two loan types. Remember, it is always best to go over your mortgage options with your Loan Originator.

If you are interested in learning more about each home loan or starting the mortgage process,  please click here to talk to a Licensed Mortgage Loan Originator.