FHA vs. Conventional

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LoansWhat’s the difference between an FHA loan and a conventional loan?

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• FHA loans are backed by the Federal Housing Administration and offered only through FHA-approved lenders.

• Conventional loans are not backed by any federal agency.

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Other differences:

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• FHA loans generally require smaller down payments than conventional loans.

• FHA loans require mortgage insurance (MI), while conventional loans can avoid PMI if you put down at least 20%.

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Maximum FHA Loan Amount

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The FHA loan limit depends on the area’s cost of living and the number of units on the property. High-cost areas allow higher loan amounts. Typical FHA borrowers often have financial limits, so this usually isn’t a major concern.

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Benefits of an FHA Loan

• FHA loans are ideal for first-time buyers, seniors, or anyone with limited affordability. Benefits include:

• Low down payment (as little as 3.5%)

• Flexible credit and income requirements

• Lower closing costs

 

How to Qualify for an FHA Loan

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FHA loans have more flexible requirements than conventional loans. Key criteria:

• Must be used to purchase a primary residence

• Property must meet FHA guidelines and minimum standards

• Home must be owner-occupied

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Required Documentation:

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W-2s from the last two yearsTax returns from the last two yearsOther verifiable income (child support, alimony, Social Security, etc.)Valid ID

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How to Apply

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Once eligibility is confirmed, you can apply through an FHA-approved lender. Have your income documentation, tax returns, and identification ready.

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Types of FHA Loan

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FHA loans offer options to match different needs:

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Fixed-Rate FHA Loans:

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• 30-year, 25-year, 20-year, or 15-year terms

• Provides interest rate stability for the life of the loan

• Shorter terms (like 15 years) build equity faster and allow for larger down payments on future homes

• Longer terms (like 30 years) offer lower monthly payments and are ideal if you plan to stay in the home long-term

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FHA Adjustable-Rate Mortgage (ARM):

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• Offers a low introductory rate for the first few years

• After the initial period, the rate adjusts at set intervals

• Ideal for buyers planning to move within a few years

• Example: 5-year hybrid ARM (fixed for 5 years, then adjusts annually with a 2% annual cap and 6% lifetime cap)

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Ready to Get Started?

Evaluate your down payment, credit score, and preferred rates to choose the FHA loan that fits your needs. Contact us today to explore your options!