Conventional Loan vs FHA | Which Mortgage Loan is Better?

Conventional Loan vs FHA | What Home Loan to Get

So in the down payment category the winner really is hey everyone it’s aisha and welcome back to my channel i get a lot of questions about fha in general but it’s definitely increased over the past couple months and if you’ve noticed i’ve been putting out a lot of fha content because i want to address as many of those questions that you guys have as possible so

Today we’ll talk through five major categories that fha loans and conventional loans differ and we’ll talk about which one is best like i said if you’re interested in fha and you’re looking for more information i have a ton of videos linked in the description for you to check out after you’re done watching this video and if there are other questions regarding fha

Or anything regarding real estate for beginners or rental properties please let me know in the comments so i can address them in future videos now that i have a little bit of a subscriber base i want to make sure that i’m creating content that really addresses the questions that you guys have regarding real estate so if there are any major topics that you want to see

Me cover or if you have any general questions whatsoever please seriously let me know in the comments or reach out in any way so that i can know what your questions are and then i can create content that really fits your needs and to that if you end up finding this video helpful i would love if you could hit the thumbs up button because it does help with my content

Performs and it helps out my channel a little bit but with all that said let’s get into these five major categories and show the differences between fha loans and conventional loans the first major difference is when it comes to down payments fha loans are known for having a really low down payment and you can actually buy a house with as low as a three and a half

Percent down payment that is based on a 580 credit score but you can actually secure an fha loan with a lower credit score as low as 500 but you would have to put a little bit more down as much as 10 percent when looking at a conventional loan the industry standard is 20 down payment because anything lower than that then you have to get private mortgage insurance

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Fha also has mortgage insurance except it’s backed by the government that’s actually a government insured loan and that’s what makes it different than like a conventional loan however a lot of people don’t know that conventional loans actually can have a huge range of down payment options depending on your needs and depending on what your qualifications are there

Are actually some conventional loans that let you put down as low as three percent however i said some and it’s not all conventional loans so even though conventional loans can be slightly lower the pool of those mortgages available just aren’t as many as fha which was really designed as a low down payment program for homeowners who needed some assistance with

That down payment so in the down payment category the winner really is fha another major category to help you qualify for a loan is your credit score i kind of briefly already mentioned this that fha allows you to put three and a half percent down with a 580 credit score or higher but again you can go as low as 500 you just will have to put a little bit more

Money down those are the minimums for the fha program so then you still have to go to a lender to get that approval and they may have slightly different credit score requirements but like i said fha’s minimum is quite low conventional loans typically require a little bit higher of a credit score usually it’s said that it’s required around like 720 or higher and

Then the lower your credit score of course they usually make up for that by giving you a higher interest rate the credit score requirements for fha are so low so it’s no doubt in this category that fha is the winner again the next category is the loan limit or how much money you’re able to take out the 2020 fha loan limit is 330 000 but again it really depends

On the region because there’s some regions of the country that are way more expensive to live in than others so this range is really 330 to mid 700s depending on what market you live in conventional loan limits are actually set by another government agency which is the federal housing finance agency their loan limit for 2020 is right around 510 000. anything

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More than that is considered a jumbo loan and it comes with its own requirements and restrictions so for loan limits there really is no frontrunner because it really depends on where you live so we’ll call this one a tie the fourth category that we’ll cover is inspections and appraisals fha appraisals are always way more strict than conventional appraisals this

Is because it’s insured by the government so they want to make sure that they’re taking on as little risk with the asset as possible for fha parties come in to not only appraise a property but they also need to check it for safety and soundness and to make sure it’s in accordance with local code restrictions conventional loans also do require appraisals but when

It comes to the inspections they definitely are a lot less strict so for this one it’s super hard to say who’s a winner it just depends on what your goals are if you’re a seller and you’re trying to sell your property to someone who is pre-approved for an fha loan their inspection is probably going to be a lot more strict and the inspection may come back with

A lot of things that you may need to fix or compromise on before that you can sell their property to them if you’re looking for a super safe super sound property and you’re not looking to cut any corners in any way whatsoever then definitely an fha loan will provide that inspection and that sound of mine for you on the other hand if you’re an investor or maybe

You’re looking to get a deal and you’re looking for something you could fix up a little bit and you may not care as much about the little things then it may be hard to get the property you want approved for fha in that case it may be better for you to have gone with a conventional loan where the inspection standards are just not as strict so like i said it’s

Really a tie again because it just depends on your goals and the last category we will go into is the requirements for you to own and live in that property when you get an fha loan it is super important for you to understand that they are granting you that fha loan on the fact that you will live in that property they expect you to make that fha property your

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Primary residence because they don’t want the fha program funding people’s investment dreams because of that you have to sign off on paperwork that says you will make that property your primary residence for at least one year so that means if you’re looking for a pure investment property a property that you can flip or a property that you can use as a rental right

Away fha will not work for you the only way around this is through house hacking and i have a number of videos on house hacking it’s basically a legal way to bypass this law and you can still use fha to fund multi-family investment properties for more information on house hacking please check out some of the videos i have linked in the description below but

Before you jump to that video let’s finish out this list so with conventional loans you really don’t have any restrictions once you purchase the property you’re really able to do whatever you want with that property whether you want to fix it up and then sell it in a few months whether you want to turn it into a rental property right away again you really don’t

Have that restriction so when it comes to the category of living requirements conventional is a clear winner so which loan is best for you to get well as you can see by this list there really is no clear winner there are some advantages to fha and there are some advantages to having a conventional it really just depends on your needs what your current financial

Position is and what your long-term goals are either loan is great in many different ways and that’s what i wanted to get through with this video so my question to you is are you planning on buying a home this year and if you are what type of loan are you thinking of getting please let me know in the comments below that way in the future i can better make videos

That answer the questions that you guys have so that’s all i have for you guys today so thank you for watching and i’ll talk to you soon

Transcribed from video
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