Conventional vs FHA
Pioneer Mortgage Funding, Inc.
Published on June 6, 2022

Conventional vs FHA

Many of my buyers have an opportunity to use FHA or conventional loans. They both have pros and cons so let’s look at them now:



Forgiving with credit events/score
Fixed rate for mortgage insurance monthly so there is no penalty for credit score
Attractive interest rates
Generally can borrower a higher percentage of your income for your housing and overall expenses (known as DTI – debt to income ratio)

The mortgage insurance does not come off your loan unless you refinance into conventional
A non-refundable 1.75% upfront fee is added to the loan by FHA/HUD
FHA offers are perceived by some sellers as less attractive than conventional so it can limit the opportunity for purchase
Subject to the “Flip rule” meaning the property can’t have been sold at all in the last 90 days and there are restrictions if it is sold in 180 days
All borrowers pay the same rate for mortgage insurance so if your credit score is higher your monthly payment could be higher than conventional



Mortgage insurance can be removed either through loan pay down or appreciation (confirmed with appraisal) – 78% loan to value or less it will automatically be removed
More attractive to many sellers
Mortgage insurance is based on down payment and credit score so it could be a lower monthly payment


Interest rate usually higher for conventional vs. FHA
Can be more limited on how much you can borrow/qualify for

As a general rule, credit scores above 680 are stronger candidates for conventional loans, but every situation is unique. Mortgage insurance, whether paid by the lender through a no MI program, or monthly by the borrower, is required when you put less than 20% down for conventional loans. For FHA, mortgage insurance is always required, no matter what your down payment is.

A trusted mortgage professional can give you advice and side by side comparisons to help you make a decision that is best for you and your financial goals.

Pioneer Mortgage Funding, Inc.
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(813) 363-5953