Decision: Conventional Loan vs. FHA Loan

When considering a conventional loan versus an FHA loan, the primary question to ask yourself is whether you value flexibility and convenience or cost. If you value flexibility and convenience, then opting for a conventional mortgage will suit you. If you are most concerned over the cost of your loan, you will get a better deal on most FHA options.

Convenient Conventional Loans

Conventional loans have shorter application processes and they do not place as many restrictions on you once the loan is funded. An FHA loan contract will limit the additional debts you can take out, including home equity loans or second mortgages on the property. FHA loans will also require FHA-approved modifications, if needed at any point in the future.

FHA Loan Savings

The main goal of an FHA loan is to provide more affordable options to home owners through the process of loan guarantees. An FHA guaranty simply means the FHA will purchase your loan out of default if you are unable to pay it in full. With this guaranty, the lender is protected against the majority of risk associated with the mortgage and can extend you a lower mortgage rate as a result. FHA loans also have lower down payment requirements.

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