Conventional Vs FHA Loans

There are many differences between conventional and FHA financing loans. To qualify for a conventional loan, for instance, you will need to pass a more stringent set of guidelines, like having a relatively higher credit score and a lower debt-to-income ratio.

Also, if you are purchasing a primary residence, the typical down payment for a conventional loan is at minimum 5% 20% of the home's value. So, if the home is selling for $300,000, the required down payment would be $15,000. $60,000.

Qualifying for an FHA loan is generally easier due to more lenient guidelines, such as the allowance of lower credit scores and lower down payments. The typical down payment when purchasing a primary home with a FHA loan is 3.5%. So, the same $300,000 home that requires a $15,000 $60,000 down payment with a conventional loan, will only require $10,500 with a FHA loan. FHA loans do have maximum allowed loan limits so it is important to check the allowable loan limit within the location you are looking to build.

Another big difference between Conventional and FHA loans is that FHA loans require mortgage insurance. Conventional loans only require mortgage insurance if less than a 20% down payment has been made.

For more information, please contact a Dunhill homes representative.