FHA vs. Conventional Loans: Which is Best for You?

Whether you’re searching for a new home or looking to refinance your current mortgage, there are many loan options available for you. Two of the most common loan options are conventional and FHA. Qualifying for each comes down to your credit score, available down payment, and long-term goals. Below are the pros and cons of each loan type and will help you determine which option is best for you.

FHA Loans

FHA loans are insured by HUD and are eligible for purchasing, refinancing and home repairs. These loans can be attractive to buyers with low-to-average credit scores. To qualify for the lowest down payment available, your credit score must be 580 or higher. FHA loans require a down payment of at least 3.5 percent. You are also required to pay monthly mortgage insurance. Your down payment can be a gift or there are many down payment assistance programs available and grants accepted.

Conventional Loans

This is the most common loan type. If you have good credit, then get rewarded with great rates through Fannie Mae and Freddie Mac. With conventional loans, your credit score must be 620 or higher. The typical down payment is between 5 and 20 percent of the loan. Mortgage insurance monthly payments are required if you have a down payment of less than 20 percent, but generally, the insurance can be cancelled when your loan-to-value ratio reaches 80 percent.

There are pros and cons to each of these loan types. To learn more each about mortgage loan or to find out if you qualify, contact a loan officer at First Ohio Home Finance today!