DIFFERENCE BETWEEN FHA LOANS AND CONVENTIONAL LOANS
| Érika Busch|
Profesional y experta
en el tema
de fina raíz en
Mortgage insurance (MI) is mandatory with FHA loans
Private Mortgage Insurance (PMI) is also mandatory for Conventional loans but you can avoid it on a conventional loan by putting down at least 20%.
FHA loans allow lower credit scores and require less elapsed time for major credit problems. Conventional loans, however, may require less paperwork and offer better options to avoid costly mortgage insurance premiums but requires to have higher credit and better income
Down payment for FHA loan is 3.5% while conventional loans is 3% (for first time home buyers)
Conventional loan interest rates are typically a little higher than FHA mortgage rates. That's because FHA loans are backed by the Federal Housing Administration, which makes them less “risky” for lenders and allows for lower rates
The closing costs in your FHA loan will be similar to those of a conventional mortgage loan. These costs typically will be around 2% to 6% of the cost of your property. Your costs will be tied to things like your loan amount state the property is located in and lender fees.
The 2023 FHA loan limit is $472,030 in low-cost areas and $1,089,300 in expensive markets while Conventional loans are subject to the conforming loan limit set by the Federal Housing Finance Agency. For 2023, that limit is $726,200 for most of the U.S. Mortgages that exceed that threshold are called “jumbo loans.”