By Érika Busch, Profesional in mortgage, sell and buy buildings and properties in the United States with big experience.

 DIFFERENCE BETWEEN FHA LOANS AND CONVENTIONAL LOANS

 Érika Busch
Profesional y experta
en el tema
de fina raíz en
Estados Unido

FHA loans are backed by the Federal Housing Administration and offered by FHA-approved lenders. Conventional loans are not insured or guaranteed by the government.

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.”