Texas Lone Star Lending Video
5 Key Differences Between FHA & Conventional Loans
FHA and conventional loans are both popular, but they work differently.
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FHA and conventional loans are both popular, but they work differently. Here are 5 key differences to understand.
Government-Backed vs. Conventional
FHA loans are insured by the federal government, while conventional loans are not. This difference affects lending guidelines and how interest rates are determined.
Credit Score Requirements
FHA loans generally allow lower credit scores. Conventional loans may offer better pricing to borrowers with stronger credit.
Down Payment Options
FHA loans allow as little as 3.5% down for many borrowers. Some conventional programs allow qualified buyers to put down as little as 3%.
Mortgage Insurance Rules
Both options may require mortgage insurance with a smaller down payment, but the costs and removal rules differ. FHA mortgage insurance rates are also the same regardless of your credit score.
Which Borrower Benefits Most
Neither loan is automatically better. Your credit, down payment, debt, and long-term goals all help determine the better fit.
Choosing the right loan isn't about finding the "best" program. It's about finding the one that fits you best.