Conventional Loan vs. FHA Loan
If you are planning to buy a home one of the first things you have to consider is what type of mortgage you need to experience. Conventional loan and FHA loan are two most popular option that is usually considered by the homeowners. The primary distinction between both types of loans is FHA Loans are insured by the Federal Housing Administration whereas conventional mortgage is not insured by the federal agency.
While comparing both types, FHA loans have a minimum down payment of 3.5% and conventional mortgage allows down payment of 3%. if you are having minimum credit score you can qualify for the FHA Loan but in case of a conventional loan, you have to show 620 credit score or higher. Private mortgage insurance allows the lender to recoup any financial loss and in the case of FHA loans, they also carry private mortgage insurance that is known as mortgage insurance premiums. With an FHA loan, you will get both upfront and monthly premiums.
The upfront the premium can be or paid at the closing of the monthly premium that is included as part of your mortgage payment. In the case of conventional mortgages, they can pay a single premium or a monthly premium. The size of payment will be to determine your PMI rate and the credit score. So how much you can borrow loan depends on the type of loan. FHA loan limits depend on your planning like what you want to buy and the level of prices in your area.
A conventional loan can be used to buy a primary
residence and the rental property but you have to make sure about the type of
property because Conventional and FHA loans also vary in the varieties of
property you can use them. If you don't come in the category of both FHA and
conventional loan you can get another option by visiting Pawnshop.