FHA vs conventional loans
The two most common ways to buy a home, side by side. Which fits depends on your credit, down payment and plans.
FHA and conventional loans are the two most common ways to buy a home. The right one depends mostly on your credit, your down payment and how long you plan to keep the loan.
| FHA | Conventional | |
|---|---|---|
| Backed by | Federal Housing Administration | Fannie Mae and Freddie Mac guidelines |
| Credit | More flexible | Better pricing for strong credit |
| Mortgage insurance | Upfront and monthly, often for the life of the loan with a small down payment | Monthly, removable once you have enough equity |
| Property standards | Stricter condition requirements | Standard appraisal |
| Condos | Project must be FHA-approved | Project review by the lender |
| Occupancy | Primary residence only | Primary, second home or investment |
When FHA fits
- Your credit score or history is below what conventional pricing rewards.
- Your debt-to-income ratio is on the high side.
- You are buying your first home with a small down payment.
When conventional fits
- You have good credit.
- You want mortgage insurance that goes away.
- You are buying a second home or investment property.
Pitfalls to watch for
Questions people ask
Is FHA only for first-time buyers?
No. Anyone who meets FHA guidelines and will live in the home can use FHA. It is popular with first-time buyers because of its credit flexibility.
Which has lower mortgage insurance, FHA or conventional?
It depends on your credit and down payment. FHA mortgage insurance usually lasts longer, often for the life of the loan with a small down payment. Conventional mortgage insurance can be removed once you have enough equity. Compare both on your actual numbers.
Can I switch from FHA to conventional later?
Yes, by refinancing once your credit and equity qualify. Many borrowers do this to remove FHA mortgage insurance.
Talk it through with a licensed broker
Call 949-463-9898 or send your scenario. You get a straight answer the same day, including when this loan is not the right fit.