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Financing - FHA vs Conventional Mortgages

Updated: Jan 8, 2023

FHA loans or conventional loans?

There are a couple of different nuances here between the two that will help you make a better decision on which one is right for you.

Right off the bat FHA loans normally have a floor of 580 credit score so FHA loans are better for people with lower to middle credit scores whereas when you have a higher credit score conventional is usually going to be the best loan for you and what I mean by the best loan is what's going to give you the most savings. Conventional loans with a lower to mid credit score you're going

to have a higher rates than you would with an FHA loan, FHA loans are suited more towards low credit to mid credit

whereas conventional loans normally around that 680 range you're going to start seeing a lot better interest rates. Also on the FHA side you have three and a half percent minimum down payment so if it's a hundred thousand dollar house you have to put $3,500 down on that property, on conventional loans sometimes you can get 5% down, sometimes there's income limits or you have to be a first-time homebuyer but most of the time the down payment is actually 5% - 20%, so if the 5% down is too much you can flip over to the FHA loan to get that three and a half percent down and save you some money

at closing. FHA is going to be a more accommodating for people with lower credit and less money down and conventional is best for people that have much more money to put down and better credit scores. One of the biggest differences to me personally with FHA is having to pay mortgage insurance due to putting the minimum down payment which you can get more on during my next post.

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