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There are several key differences between these two loans that factor in your decision making. Here is a quick comparison:

FHA Advantages

  • 580 FICO score requirement
  • 3.5% down payment
  • Down payment can be a gift from a friend or family member
  • FHA allows a “non-occupying” co-signer
  • Sellers can pay up to 6% & title towards the closing costs
  • Higher allowed debt-to-income ratios
  • Much easier to qualify for an FHA loan
  • FHA loans are assumable mortgages
  • The FHA mortgage rate is lower than a conventional mortgage

FHA Disadvantages

  • Potentially lower loan limits
  • Upfront PMI and monthly PMI is required
  • Mortgage insurance is required regardless of down payment

Conventional Advantages

  • Potentially higher purchase price
  • Does not require a funding fee
  • Mortgage insurance is cancelable

Conventional Disadvantages

  • Higher score requirements (620 score required)
  • Seller may only contribute 3% towards closing costs
  • Mortgage insurance is not required if you put down 20%

FHA loan credit requirements

If you would like to discuss an FHA loan, please click here to contact an alliance member