{"id":10719,"date":"2018-05-21T11:00:55","date_gmt":"2018-05-21T17:00:55","guid":{"rendered":"https:\/\/www.richmondamerican.com\/blog\/?p=10719"},"modified":"2024-01-22T08:00:34","modified_gmt":"2024-01-22T15:00:34","slug":"conventional-vs-fha-home-loan","status":"publish","type":"post","link":"https:\/\/www.richmondamerican.com\/blog\/conventional-vs-fha-home-loan\/","title":{"rendered":"Deciding on a Conventional vs. FHA Home Loan"},"content":{"rendered":"\n<p>Federal Housing Administration (FHA) and conventional (or conforming) home loans have long been the most common mortgage options on the market. But which one is right for you? First, it\u2019s important to clear up a major misconception that an FHA home loan is only for first-time homebuyers. While that\u2019s a myth, it is true is that FHA loans have historically been more attractive to first-time homebuyers due to lower down payment requirements and interest rates. But as you\u2019ll see, the differences between FHA and conventional loans aren\u2019t as stark as they used to be. Nevertheless, nuance matters when dealing with large sums of money, so let\u2019s review some key differences.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Credit score requirement<\/h2>\n\n\n\n<div style=\"width: 500px; text-align: center; color: #ffffff;\">\n<div style=\"width: 40%; background: #5d524a; float: left; clear: none; border: 1px solid #ffffff; padding: 10px; font-weight: bold;\">FHA<\/div>\n<div style=\"width: 40%; background: #af272f; float: left; clear: none; border: 1px solid #ffffff; padding: 10px; font-weight: bold;\">Conventional<\/div>\n<div style=\"width: 40%; background: #5d524a; float: left; clear: none; border: 1px solid #ffffff; padding: 10px;\">FICO\u00ae score<br>as low as 500*<\/div>\n<div style=\"width: 40%; background: #af272f; float: left; clear: none; border: 1px solid #ffffff; padding: 10px;\">FICO\u00ae score<br>as low as 620*<\/div>\n<\/div>\n\n\n\n<div style=\"height: 0; clear: both; margin: 0; padding: 0;\">&nbsp;<\/div>\n\n\n\n<p>There\u2019s no question that FHA home loan requirements give buyers more credit wiggle room. This also makes it a clear-cut decision if you have a credit score below 620, as you likely won\u2019t meet the threshold to qualify for a conventional home loan.<\/p>\n\n\n\n<div class=\"disclaimer\">*<a href=\"https:\/\/www.richmondamerican.com\/blog\/credit-score-for-a-mortgage\/\" target=\"_blank\" rel=\"noopener noreferrer\">Credit score requirements<\/a> may differ depending on lender and amount of down payment<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Down payment<\/h2>\n\n\n\n<div style=\"width: 500px; text-align: center; color: #ffffff;\">\n<div style=\"width: 40%; background: #af272f; float: left; clear: none; border: 1px solid #ffffff; padding: 10px; font-weight: bold;\">FHA<\/div>\n<div style=\"width: 40%; background: #5d524a; float: left; clear: none; border: 1px solid #ffffff; padding: 10px; font-weight: bold;\">Conventional<\/div>\n<div style=\"width: 40%; background: #af272f; float: left; clear: none; border: 1px solid #ffffff; padding: 10px;\">As low as 3.5%*<\/div>\n<div style=\"width: 40%; background: #5d524a; float: left; clear: none; border: 1px solid #ffffff; padding: 10px;\">As low as 3%**<\/div>\n<\/div>\n\n\n\n<div style=\"height: 0; clear: both; margin: 0; padding: 0;\">&nbsp;<\/div>\n\n\n\n<p>20% down used to be the classic standard for conventional loans. Not any longer. Today, qualified buyers are able to pay even less down on a conventional than they\u2019d have to for an FHA loan, although there are still good reasons for paying 20% down <a href=\"https:\/\/www.richmondamerican.com\/blog\/how-to-save-money-for-a-down-payment-seven-daily-strategies\/\" target=\"_blank\" rel=\"noopener noreferrer\">if you have the funds<\/a>.<\/p>\n\n\n\n<div class=\"disclaimer\">*10% with a credit score below 580<\/div>\n\n\n\n<div class=\"disclaimer\">**Certain restrictions may apply.<\/div>\n\n\n\n<div>\n<h2>Gift funds<\/h2>\n<div style=\"width: 500px; text-align: center; color: #ffffff;\">\n<div style=\"width: 40%; background: #5d524a; float: left; clear: none; border: 1px solid #ffffff; padding: 10px; font-weight: bold;\">FHA<\/div>\n<div style=\"width: 40%; background: #5d524a; float: left; clear: none; border: 1px solid #ffffff; padding: 10px; font-weight: bold;\">Conventional<\/div>\n<div style=\"width: 40%; background: #5d524a; float: left; clear: none; border: 1px solid #ffffff; padding: 10px;\">All funds used for the down payment can be gifted*<\/div>\n<div style=\"width: 40%; background: #5d524a; float: left; clear: none; border: 1px solid #ffffff; padding: 10px;\">All funds used for the down payment can be gifted**<\/div>\n<\/div>\n<div style=\"height: 0; clear: both; margin: 0; padding: 0;\">&nbsp;<\/div>\n<p style=\"margin-top: 15px!important;\">Both loan types allow <a href=\"https:\/\/www.richmondamerican.com\/blog\/frequently-asked-questions-using-gift-funds-to-buy-a-home\/\" target=\"_blank\" rel=\"noopener noreferrer\">gift funds<\/a> for the down payment (and even other expenses like closing costs), which is significant because gift funds are an important launching pad for many first-time homebuyers.<\/p>\n<div class=\"disclaimer\">*FHA gift funds can come from family, friends and even business or government entities. Certain restrictions may apply.<\/div>\n<div class=\"disclaimer\">**Gift funds must come from a relative, fianc\u00e9, fianc\u00e9e or domestic partner. Certain restrictions may apply.<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\">Interest rates<\/h2>\n\n\n\n<p>FHA loans generally offer lower interest rates than conventional loans. However, that difference could be marginal depending on market fluctuation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">Mortgage Insurance<\/h2>\n\n\n\n<div style=\"width: 500px; text-align: center; color: #ffffff;\">\n<div style=\"width: 40%; background: #af272f; float: left; clear: none; border: 1px solid #ffffff; padding: 10px; font-weight: bold;\">FHA<\/div>\n<div style=\"width: 40%; background: #af272f; float: left; clear: none; border: 1px solid #ffffff; padding: 10px; font-weight: bold;\">Conventional<\/div>\n<div style=\"width: 40%; background: #af272f; float: left; clear: none; border: 1px solid #ffffff; padding: 10px;\">Required for the<br>life of the loan*<\/div>\n<div style=\"width: 40%; background: #af272f; float: left; clear: none; border: 1px solid #ffffff; padding: 10px;\">Generally only required<br>until you reach 20% equity<\/div>\n<\/div>\n\n\n\n<div style=\"height: 0; clear: both; margin: 0; padding: 0;\">&nbsp;<\/div>\n\n\n\n<p>Conventional loans have a clear edge here. Mortgage insurance premiums (MIP) are designed to protect the lender if you default on your loan, so there\u2019s no personal benefit to paying them longer than you have to. For each year that you\u2019re required to pay premiums, they\u2019ll cost between 0.5% to 1.0% of your total loan amount.<\/p>\n\n\n\n<p>*Unless you put down 10% or more, in which case mortgage insurance premiums are only required for the first 11 years of the loan term<\/p>\n\n\n\n<p>For more on finding the right mortgage for you, call 866.400.7126 to speak with one of our affiliate home loan officers at <a href=\"http:\/\/www.homeamericanmortgage.com\" target=\"_blank\" rel=\"noopener noreferrer\">HomeAmerican Mortgage Corporation<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Federal Housing Administration (FHA) and conventional (or conforming) home loans have long been the most common mortgage options on the market. But which one is right for you? First, it\u2019s important to clear up a major misconception that an FHA home loan is only for first-time homebuyers. While that\u2019s a myth, it is true is [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":10728,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"inline_featured_image":false,"ub_ctt_via":"","cybocfi_hide_featured_image":"","footnotes":""},"categories":[4],"tags":[382,206],"featured_image_src":"https:\/\/www.richmondamerican.com\/blog\/wp-content\/uploads\/2018\/05\/HMC30995_RET_V1_S-1.jpg","author_info":{"display_name":"rahblogadmin","author_link":"https:\/\/www.richmondamerican.com\/blog\/author\/rahblogadmin\/"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\r\n<title>Deciding on a Conventional vs. FHA Home Loan<\/title>\r\n<meta name=\"description\" content=\"Should you get an FHA or conventional home loan? 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