Difference between Conventional Morgage and FHA Mortgage
|
Basis |
Conventional Mortgage |
FHA Mortgage |
|---|---|---|
|
Meaning |
Conventional mortgages are offered by private lenders such as banks, credit unions, and mortgage companies, and they conform to guidelines set by government-sponsored enterprises. |
An FHA mortgage is a home loan insured by the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD). |
|
Down Payment |
Conventional mortgages usually need a higher down payment, typically between 3% to 20% of the home’s price. |
FHA mortgages allow for a lower down payment, often as low as 3.5% of the home’s price. |
|
Credit Score |
Conventional mortgages generally require a higher credit score for approval. |
FHA mortgages are more lenient with credit score requirements. |
|
Eligibility Criteria |
Conventional mortgages have stricter eligibility criteria, which may make it harder for some people to qualify. |
FHA mortgages have more relaxed eligibility criteria, making it easier for borrowers with lower credit scores or smaller down payments to qualify. |
|
Loan Limits |
Conventional mortgages typically have higher loan limits. |
FHA mortgages have lower loan limits set by the FHA based on the area’s median home price. |
|
Interest Rates |
Interest rates for conventional mortgages can vary based on the borrower’s creditworthiness. |
FHA mortgages usually offer fixed interest rates, providing stability in monthly payments. |
|
Property Types |
Conventional mortgages can finance various property types, including primary residences, second homes, and investment properties. |
FHA mortgages are intended for primary residences only and cannot finance investment properties. |
Difference between Conventional Mortgage and FHA Mortgage
Two common options while buying any house include Conventional Mortgages and FHA Mortgages. A conventional mortgage is a loan from a private lender, like a bank, without any government backing. On the other hand, an FHA mortgage is insured by the Federal Housing Administration, which is part of the U.S. Department of Housing and Urban Development (HUD).
Table of Content
- What is Conventional Mortgage?
- What is FHA Mortgage?
- Difference Between Conventional Morgage and FHA Mortgage
- Conclusion
- Conventional Mortgage and FHA Mortgage – FAQs
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