What Are The Differences Between FHA And Conventional Loans?

Mortgage and Lending with Academy Mortgage Corporation NMLS #229617

Not sure what a FHA loan can do for you? Hoping to figure out what option is right for your situation?

There are several differences between FHA and conventional loans, not the least of which is that the Federal Housing Administration insures their loans if they meet certain criteria and are offered through particular lenders. Conventional loans are not backed by federal agencies, and can be obtained through most lenders, including various banks and mortgage companies.

Here are some of the other ways in which FHA and conventional loans differ, and how they may affect your decision-making process.

Down Payment

Conventional loans typically require you to make a larger down payment than a government backed loan. With a government-backed FHA loan, a smaller down payment is all that is generally required.

Furthermore, you can take advantage of gift money from a qualified donor to cover your closing costs and down payment. Conventional lenders will not accept similar arrangements.

Mortgage Insurance

If you choose to get a FHA loan, you will be required to make upfront and annual mortgage insurance payments. This arrangement allows lenders to recoup costs if you as a borrower default on the home loan.

With conventional loans, if you have the required minimum down payment, you won’t necessarily need to pay for mortgage insurance.


Conventional loans come in a variety of different packages, and tend to offer a little more flexibility compared to FHA loans. Whether you want a fixed mortgage or an adjustable-rate home loan, you can pursue different options with conventional loans, which you can get at most banks and lenders.

Not all lenders deal with FHA products, so that might limit where you can go to get a FHA loan as well.

Property Types

Choose the right mortgage for the right home.

Choose the right mortgage for the right home.

With FHA financing, you may not be able to purchase certain homes or condos. Conventional loans generally don’t have similar limitations. FHA also has minimum property standards, which means that you may not be able to purchase the home you want to with a FHA loan.

FHA loans must be applied to a property you are going to live in, so if you’re looking at purchasing a second home, or you want to own an investment property, you’re probably going to have to look into a conventional loan.


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Comments (1)

Certified Mobile Notary Signing Agent - Smith Mountain Lake, VA
Highest Ranked Certified Mobile Notary in Virginia

All good points for prospective buyers to consider

Oct 05, 2015 04:29 AM