FHA Loan vs Conventional. Which One Should You Get?

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Should you get an FHA loan or conventional loan? The short answer is it depends on your current situation. Here are a few factors that come into play with these two types of loans. 

FHA Loan vs. Conventional: What’s Your Credit Score? 

The first thing to consider as you weigh your two options is your credit score. What is it right now? If you’re in the 500 – 580 range, your best bet is the FHA loan. These loans were specifically designed for people who don’t have very high credit scores but have proven they pay their bills on time and are financially responsible. 

Is your score at least 620? If so, you can probably qualify for a conventional loan. The higher your score, the more likely you will be approved. 

How Much Money do You Have for a Down Payment?

Another factor in the FHA vs. conventional loan debate is how much money you have saved up. If you are buying your first home, it can be hard to save up a significant down payment. If you’re buying a $200,000 house, saving up the recommended 20% down payment for a conventional loan would be $40,000. That can take a while to build up.

If you’re still saving up, your best bet is probably the FHA loan. It will let you get into the home quicker, because you only need at least 3.5% of the home purchase price. That lets you drop the required amount to just $7,000 on that $200,000 home. Yes, that will still take some time to save up. But it’s a lot less than $40,000!

FHA and Conventional Loan Limits

Did you know some types of loans have limits? On one hand, there’s the limit on what the bank is willing to offer you but there’s also a limit on how much they’re even allowed to offer you. 

These numbers can change over time, but right now the limits on single-family home are

  • $331K for an FHA loan
  • $510K for a conventional loan

If you’re buying a house that’s less than $331K, you can go with either option. But if you’re trying to borrow more than the maximum allowed on an FHA loan, you may need to go with a conventional instead. 

Note I said may – some areas have higher limits on loans than others. Ask your loan officer for guidance on the limit for your area. 

Debt-to-Income Ratio Differences between FHA and Conventional Loans

Your debt-to-income ratio is a number that is important in the mortgage world. It reflects how much of your gross income is taken up by debt. 

For example, if your debt leads to bill payments of $2,000 a month and you make $4,000 a month, your DTI is 50% ($2,000/$4,000 = 50%)

This is important because you have a little more leeway with an FHA loan, as your maximum DTI is 50%. If you want a conventional loan, you usually need a DTI of lower than 43%. 

If you really want a conventional loan, you can take action to improve your DTI such as paying off revolving debt or adding to your income. 


Should you get an FHA or conventional loan? For some personalized advice, call us at (844) 765-6844. We’ll talk to you soon!



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On a FHA 30-year Fixed rate purchase with loan amount $230,743 (at 96.5% LTV and 3.5% down payment from borrower) at an interest rate of 3.125% with 0% discount point (Annual Percentage Rate – 4.2403%), you will be required to make 360 equal monthly payment of $988.45  (which includes principal and interest only, so your actual payment will be higher).