2007-03-26 07:40:37 · 6 answers · asked by Anonymous in Business & Finance ➔ Renting & Real Estate
FHA loans are guaranteed by the government. Conventionals are not, and require PMI if you don't have at least 20 percent equity. FHA loans require a minimum downpayment, and I think they carry a reduced interest rate. If you go FHA, you need a more in depth home inspection prior to closing.
2007-03-26 07:46:52 · answer #1 · answered by cardinalboy97 3 · 0⤊ 0⤋
The term Conventional Loan includes all loans under the current FNMA and FHLMC lending limits. Some of these may be called Conforming, A paper, sub prime, Alt A, A Minus, BC (bad credit) and other industry names.
The Federal Housing Administration provides a loan guarantee program in lieu of private mortgage insurance so qualified borrowers can get a mortgage loan with a low down payment.
Points of Differences
Underwriting criteria.
The main advantage of a FHA vs. Conventional Loan is that the credit qualifying criteria for a borrower are not as strict as conventional loan financing and the down payment or Equity requirements are less. . FHA loans will allow the borrower who has had a few "credit problems" or those without a credit history to buy a home.
Gift
Another advantage of a FHA vs. Conventional Loan is that FHA is one of the few home mortgage programs that allow a borrower to have their down payment gifted from a family member, a governmental agency, or non-profit organization. This allows homebuyers without the necessary money to buy a home today.
Up-front mortgage insurance
A FHA mortgage has up-front mortgage insurance (MI) of 1.5% of the loan amount and is added right to the loan. A conventional mortgage has no up-front mortgage insurance, but does have a monthly premium. This premium is determined by the loan to value.
Loan Limits
The loan limits set for FHA loans are typically less than the loan limits for conventional financing in most parts of the country. If a borrower is looking for a mortgage that exceeds the FHA loan limits for the area, the borrower would have to put additional money down on the property or finance under a conventional mortgage, Subprime, Alt A or A Minus product.
2007-03-27 10:59:26 · answer #2 · answered by Tania C Srivastava 1 · 0⤊ 0⤋
An FHA loan is guaranteed by the government. A conventional loan is not.
An FHA loan generally has lower down payment requirements. The fee for the mortgage insurance is rolled into the loan balance. Mortgage insurance on a conventional loan (if it's required at all) is added on to the payments separately.
2007-03-26 07:48:55 · answer #3 · answered by Bostonian In MO 7 · 0⤊ 0⤋
An FHA loan is a mortgage loan underwritten to FHA/HUD lending guidelines, secured by a property that conforms to FHA/HUD guidelines, whose performance is insured by premiums charged and collected by FHA.
Conventional mortgage loans are almost every other type of mortgage loan (FNMA/FHLMC conforming, subprime, bank porfolio, to name a few) - exclusive of Veteran's Administration (VA) loans.
Typically, FHA loans are obtained by first-time home buyers - those with minimal down payment money saved and/or those that have had some credit issues in the past. Typically, FHA loans are constructed on properties that have lower home values. Interest rates are very competitive with "prime" (good credit and portfolio quality) mortgage loans - but FHA loans charge an up-front mortgage insurance premium, and monthly mortgage insurance premium, that (in the end) makes them somewhat costly.
2007-03-26 08:05:52 · answer #4 · answered by Gary M 1 · 1⤊ 0⤋
I too want to ask the same question
2016-08-23 22:06:48 · answer #5 · answered by ? 4 · 0⤊ 0⤋
Not sure
2016-07-28 10:16:29 · answer #6 · answered by Anonymous · 0⤊ 0⤋