HOME PURCHASE

Finding the perfect loan for your single-family home, condo, townhouse, plot of land, or multi-family dwelling can feel like navigating through uncharted waters. With an variety of loan programs, lenders, and rates at your fingertips, the wealth of choices is truly empowering. Yet, this abundance of options can also seem daunting, leaving many prospective homeowners adrift in a sea of possibilities.

Conventional Loan vs. FHA Loan: Understanding the Differences

Conventional Loan:

Not Government-Insured: Conventional loans are not insured or guaranteed by the federal government. This can mean stricter qualifying criteria.

Down Payment: Typically requires a higher down payment, often 5% or more, although some programs allow as little as 3% down for qualified borrowers.

Credit Score Requirements: Generally requires a higher credit score, usually around 620 or above.

Private Mortgage Insurance (PMI): Required if the down payment is less than 20%, but can be removed once equity reaches 20%.

Loan Limits: Conventional loans have maximum loan limits set by Fannie Mae and Freddie Mac, which can vary by location.

Flexibility: Offers more flexibility with property types and use; ideal for second homes, investment properties, and higher-priced homes.

FHA Loan:

Government-Insured: Insured by the Federal Housing Administration, offering lenders protection against borrower default. This can make it easier to qualify.

Down Payment: Requires a lower down payment, as low as 3.5%, making it accessible for first-time homebuyers or those with less saved for a down payment.

Credit Score Requirements: Lower minimum credit score requirements, typically around 580 for the 3.5% down payment; lower scores may be accepted with higher down payments

Mortgage Insurance Premium (MIP): Requires both upfront and annual mortgage insurance premiums, regardless of down payment amount, for the life of the loan (or 11 years with a 10% or more down payment).

Loan Limits: Has set loan limits that vary by county, generally lower than conventional loan limits.

Property Restrictions: Must meet specific FHA appraisal and safety standards; primarily used for primary residences.

Choosing the Right Loan for You

The choice between a Conventional Loan and an FHA Loan depends on your financial situation, credit health, down payment capability, and long-term homeownership goals. If you value lower upfront costs and easier qualification criteria, an FHA Loan might be your path.