What is the difference between a FHA and Conventional morgage?

What is the difference between FHA and Conventional mortgages?

In this Blog, Brad Moore, Area Manager, Mortgage Loan officer, at Cadence Bank provides valuable insight into two mortgage types.

This Blog seeks to explain the differences in FHA and conventional mortgages.What is the difference between FHA and a conventional loan? While there are many misconceptions, the 2 main differences are 1) Costs and 2) Qualification guidelines.

Costs: 
FHA requires 3.5% down, requires monthly mortgage insurance, and an upfront mortgage insurance fee of 1.75% of the loan amount (which is rolled into the loan). Mortgage insurance on an FHA loan never drops off (unless you put 10% down, then it drops off after 11 years).
Conventional requires a minimum 5% down, unless you are a first time home buyer (aka..haven’t owned a home in the past 3 years) then you only have to put 3% down. There is no “upfront” mortgage insurance fee and mortgage insurance drops off automatically at 78% loan to value.
Qualification:
While both loans have certain qualification requirements, FHA tends to be a little more lenient. FHA allows for a lower credit score and a higher debt to income ratio. FHA tends to be considered a “1st Time Homebuyer” product, however, it is a great product for those who have more debt and a lower credit score. Conventional loans are credit score sensitive whereas FHA loans are not. For example you can have a 640 credit score on conventional and the rate could be 1% over market rate, but on FHA rate is the same on a 640 as it is with an 820. FHA does have stricter appraisal requirements than conventional.

For more information, Brad Moore can be reached at 251-990-5850 or bradb.moore@cadencebank.com

Thanks to Brad for providing this insight into the differences between the two types of mortgages.  Visit with Brad to discuss which plan is best for you.

Carl Gustafson – Real Estate Broker

251-533-8028

carl@thegustafsonproperties.com