Conventional VS FHA Loans
Down payment – Conventional = 3%, FHA minimum = 3.5%
Upfront MIP – Conventional = 0% upfront MIP, FHA = 1.75% upfront mortgage insurance premium
Monthly mortgage insurance – Conventional = private mortgage insurance (PMI) rates depend on loan scenario and can be removed when LTV is 80% or lower, FHA = mortgage insurance premium (MIP) is .8% for down payments 5% or greater or .85% for down payments less than 5% (for loan amounts less than or equal to $625,500, MIP as high as 1.05% on loan amounts greater than $625,500.) MIP on FHA loans can’t be canceled till after 11 years if you make a down payment of 5%
Credit requirements – Conventional = not very lenient with credit issues and low reserves, FHA = more lenient with lower credit scores, financial issues, less savings in accounts and reserves
Property selection – conventional = no restriction, FHA = if buying a condo the complex must be FHA approved
FHA and Conventional loans each have their advantages and disadvantages. Consult with a mortgage banker to see which makes more sense for your specific situation.