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How Do Conventional Home Loans Compare To FHA Loans?

By Jim Micheals

How do conventional loans compare to FHA loans?  The factors are numerous.

Home loans are among the most common loans given to people on a regular basis. This is one of the most important loans given to a person because it is not only very high in amount of money but also a financial obligation that pertains to you having shelter. There are many ways and many places to get a home loan. These include banks, credit unions, private lenders and the government. When deciding to buy a home it is of utmost importance to get the loan that is best for your needs and that you can afford to pay on a timely basis. Among the most common loans available are conventional and FHA home loans.

The factors are numerous

When getting a home loan, each entity that provides a loan has varying standards and terms. With conventional home loans the credit criteria is demanding along with more rigid terms. Since banks want to make a profit and are conservative by nature they will have higher standards than other lending entities.

HOW CONVENTIONAL LOANS COMPARE

Conventional loans typically require 20% down at market interest rate which ranges from 5-6% on average. These types of loans wil also require a credit score that fairly high ranging from 700-720. The terms on a conventional home loans do vary depending on the borrowers credit, savings income and down payment.

HOW FHA LOANS COMPARE

As far as a FHA loan goes, these home loans are more lenient and flexible than conventional loans. Like conventional loans they offer market interest rate and a down payment. However they have lower credit standards so those with below average credit can get a home loan on reasonable terms unlike the conventional counterpart. A FHA home loan will also allow a down payment as low as 5% down compared to 20% or or more with a conventional loan.

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