What is the difference between FHA and Conventional loans?

FHA refers to the Federal Housing Authority. FHA loan is a type of loan that can be acquired more easily. It does not require a great credit score. It has a higher loan to value ratio than a conventional loan. You can also enlist the help of a co-borrower on FHA loan.

You can receive help from a relative with payment of the loan. Minimum down on FHA loan is 3.5%. A conventional loan cannot be easily acquired like an FHA loan. It requires you to have an excellent credit score. The guidelines for conventional loans are not as relaxed as FHA loan. Conventional loans also have higher interest rates.

There are some people who may become confused with FHA and conventional loans because they may seem similar to each other. The FHA loan is known to be the type of loan that you can get more easily. This is considered to be more flexible however, you will be required to pay your mortgage loan.

The plus side of this is your credit score does not have to be very high. A conventional mortgage loan will require a higher credit score but you can also get better rates in the long run. It will still depend on you and your situation which one will work better for you in the long run.