Wondering if a Conventional Loan is right for you? In this blog post we will discuss the differences between Conventional Loans and FHA Loans.
What is a Conventional Loan?
Conventional loans are insured by private lenders, not by the government. To qualify for a conventional loan you need a higher credit score, a low debt-to-income ratio (DTI), and a downpayment between 5120%. If you are looking to avoid private mortgage insurance, you must out a down payment of 20% or more.
What is an FHA Loan?
An FHA loan is a government-supported home loan that is insured and guaranteed by the government via the Federal Housing Administration (FHA). FHA loans have less-restrictive qualifications, which can make it a good choice if you can't make a large down payment, have a lower credit score, or both. FHA loan down payments can be as low as a 3.5% for first-time home buyers.
Frequently Asked Questions
When is an FHA Loan the right choice?
FHA loans can be a great option for anyone who's at the beginning stages of their financial journey and looking for an investment that will fit into their current budget and qualifications.
What can be purchased with a Conventional or FHA Loan?
Both loans can be used for the purchase of single-family homes, multi-family homes, condominiums, and certain manufactured and mobile homes. There are also specific types of FHA loans, based on your lender, which can be used for new construction or home renovations.
Is an FHA Loan only for first-time homebuyers?
No, FHA loans are not only for first-time homebuyers. First-time and repeat buyer can all finance houses with FHA mortgages. The FHA loan is often marketed as a product for "first-time buyers" because of it's low down payment requirements.