FHA vs. Conventional Loan: Which One Should You Go For?

fha vs conventional mortgage

So you have finally decided to get a place of your own but are not quite sure where to get proper financing. If you have discussed the issue with your friends and family, chances are some of them might have told you to go for an FHA home loan and some might have suggested a conventional loan.

Choosing between a conventional mortgage and an FHA loan shouldn’t be confusing at all. Depending on your personal preferences and current financial circumstances, these two are both excellent options. Before making a decision, however, it is essential to take a closer look at both.

Choosing Between a Conventional and an FHA Home Loan

First, let’s discuss what an FHA home loan is and why it is a favorite among first-time home buyers. An FHA mortgage is insured by the Federal Housing Administration of the U.S. government and is issued by FHA-approved mortgage lenders. Having the U.S. government behind allows these private lenders to offer borrowers an excellent deal with more lenient credit requirements.

A conventional loan, on the other hand, is neither insured nor guaranteed by the government. To protect themselves from loss in case the borrower defaults, private lenders require higher credit scores and other requirements.

Pros and Cons of a Conventional Loan

A conventional loan is an excellent alternative to any government-insured loan. This is usually preferred by borrowers who want to avoid lots of paperwork and high-interest rates, and have a considerable amount of cash on hand for a down payment.


  • Quicker approval.
  • Less paperwork.
  • Higher loan limits.


  • 5% to 20% down payment is required.
  • Credit score requirement is at least 620.

Pros and Cons of FHA Loan

Again, FHA home loans are a favorite among home buyers but just because it’s one of the most accessible types of loan to qualify for doesn’t mean it’s for everybody. Yes, anyone with less than average credit can still be eligible, but for that to happen, a higher down payment is required. The mortgage lender will also be looking at the borrower’s income and other assets to ensure that he or she is capable of paying the monthly loan obligation.


  • A credit score of 580 and above to qualify.
  • 3.5% down payment for a credit score of 580 and above.
  • For first-time homebuyers, the down payment can be gifted by friends and family.


  • 10% down payment is required from borrowers with a credit score of 500-579.
  • Usually requires more paperwork to meet the FHA’s standards.

Which Home Loan Program Should You Choose?

Aspiring homeowners with outstanding credit who want to avoid higher interest rates, the hassle of going through the paperwork required by the government, and have some pile of cash stashed away for a down payment are better off going for a conventional loan. Those who are yet to build their credit score and would like to avail of the low down payment requirement, an FHA mortgage is the way to go. Being able to receive cash gifts from relatives and friends for a down payment is one advantage of an FHA loan that makes it preferred by many home buyers.

Regardless of your choice, it is always best to speak with an experienced FHA-approved mortgage lender before finally making a choice.

by nico2me