FHA Loan vs Conventional Loan Comparison.

FHA Loans are a great option when you have less than 20% down payment.

Are backed by the Federal Housing Administration, which allow down payments as low as 3.5%.

FHA Loan

• This is the preferred home program for first-time home buyers with a low credit score.
• The Federal Housing Administration (FHA) allows down payments as low as 3.5% for those with minimum credit score of 580 or higher.
• The FHA will insure loans for borrowers with scores as low as 500, but requires a 10% down payment for a score that is that low.
• Mortgage Insurance is required for the life of an FHA Loan and can’t be canceled.
• DTI (debt-to-income) ratio 45% (can be as high as 50%)
• 100% of down payment can be a gift
• Allows down payment assistance programs

Conventional Loans are a great option When you have 20% or more down payment.

Aren’t backed by the government, offer down payments as low as 3% to first-time home buyers with good credit.

Conventional Loan

• This is the preferred home program for first-time home buyers with a high credit score of 680 or higher.
• Available in fixed-rates, adjustable rates (ARM’s) with loan terms 10 to 30 years.
• Can be used to buy a primary residence, second home or rental property
• Mortgage Insurance is cancelable when home equity reaches 20% (unlike FHA which lasts the life of the loan, in most cases)
• DTI (debt-to-income) maximum ratio 43%
• Only part can be a gift if down payment is less than 20%
• Does not allow down payment assistance programs