Jeffrey's Blog


FHA and Conventional loans - Differences in very simple terms!

Alot of people that I have talked to in the past couple of weeks have been confused between the differences of FHA and Conventional loans.  So, I hope this simple explanation helps with all of your questions dealing with mortgage loans.

FHA requires less money down - 3.5%. Conventional (Fannie Mae and Freddie Mac) loans require at least 5% down.

FHA’s monthly mortgage insurance is much cheaper than conventional loans, usually about half and much more in many cases.

FHA’s interest rate is not tied to credit score. If you have a 620 or better you are eligible for the best FHA rate.  For conventional loans you need at least a 720 score for the best rate and scores less than 720 have higher rates. Or you pay more points to get best rate.

FHA loans can only be used to buy your primary residence, not second homes or rental houses.  Conventional loans can be used for principal residences, second homes and investment property.

FHA loan limits are approximately $271,000 and conventional loan limits are $417,000.

FHA loans are assumable. Conventional loans are not.

FHA loans have an upfront funding fee (1.75%), which is financed into the loan amount, not paid at closing.  Conventional loans do not have a funding fee.

FHA loan qualifications are governed and set by the federal agency, Federal Housing Administration, a division of the Housing and Urban Development (HUD). Underwriting guidelines and parameters for conventional loans are set forth by Fannie Mae and Freddie Mac, government sponsored entities (GSE's).

I usually recommend FHA when a buyer puts down less than 5%.  I usually recommend a conventional loan when someone puts down more than 10%. Each case is different. Credit scores and down payment money play a bigger part on the type of loan chosen in today’s mortgage market.

This article was written by Richard Martin with Residential Mortgage for the sole purpose for  You can contact Richard with any mortgage questions at...

Richard E. Martin
"When You Think Mortgage, Think Residential Mortgage."
Residential Mortgage Corp.
5888 Ridgewood Rd, Suite B
Jackson MS 39211

Cell 601-540-0419
Office 601-956-9530 x28
Fax 601-956-9680
Toll free 877-251-6368


Comment balloon 2 commentsJeffrey Dillon • December 30 2008 11:58PM


Happy New Year, Jeffrey! I thought I'd see what you've been up to. Keep blogging! ~Pat

Posted by Pat Starnes-Front Gate Realty, 601-991-2900 Office; 601-278-4513 Cell (Front Gate Real Estate) almost 10 years ago

Thanks Jeffrey for breaking down the loan limits and down payment required. It's just what I was looking for.

Posted by Jen Bowman, Realtor - Anna Maria Island & Bradenton FL (Keller Williams on the Water) about 9 years ago