Dan Green

Dan Green

Since 2003, Dan Green has been a leading mortgage lender and respected industry authority. His unwavering commitment to first-time home buyers and home buyer education has established him as a trusted voice among his colleagues, his peers, and the media. Dan founded Homebuyer.com to expand the American Dream of Homeownership to all who want it. .

Compare Homes - Conventional Vs Fha

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Conventional vs FHA: Compare Side-by-Side

This guide to Conventional vs FHA mortgages compares the similarities and differences of two popular first-time home buyer mortgages to help you pick the best mortgage loan for your home.

The Differences Between Conventional and FHA Mortgages

Choosing the right mortgage is pivotal for a first-time home buyer. The two most popular mortgages for first-time buyers, Conventional and FHA mortgages, harbor a lot of similarities. They’re also different in a lot of ways.

Highlights: Conventional Mortgage

Conventional mortgages are home loans backed by Fannie Mae or Freddie Mac, under the Federal Housing Finance Agency (FHFA). They are categorized into conforming and non-conforming mortgages. Conforming mortgages align with FHFA mortgage guidelines and mortgage loan limits, while non-conforming mortgages, often called jumbo mortgages, exceed these limits​.

Available in various fixed-rate (30-year, 20-year, 15-year, 10-year) and adjustable-rate mortgage options, these loans offer flexibility in terms and payment plans​​. To qualify, home buyers generally require:

  • A down payment of at least 3 percent
  • Verified source of income
  • A minimum credit score of 620
  • Loan sizes within local mortgage limits
  • Structurally sound and habitable homes​

Highlights: FHA Mortgage

FHA loans, insured by the Federal Housing Administration, are part of an inclusive mortgage program to make homeownership more accessible and affordable, especially for first-time home buyers. FHA loans have supported home buyers since 1934 by offering mortgage default insurance to banks​.

FHA mortgages are available as 30-year and 15-year fixed-rate, or adjustable-rate mortgages, adhering to specific loan limits. The key features include:

  • A minimum down payment of 3.5 percent
  • Verifiable income requirements
  • No strict enforcement of minimum credit scores
  • Eligibility for residential properties with 1-4 units
  • No penalties for early loan repayment​

These less stringent guidelines make FHA loans particularly suitable for those who might not qualify for other loan types, supporting a wider range of home buyers​.

Mortgages At-A-Glance

Loan FeatureConventionalFHA
Minimum Loan Size AllowedNoneNone
Maximum Loan Size AllowedSee Loan LimitsSee Loan Limits
Maximum Household Income AllowedNo RestrictionsNo Restrictions
Minimum Credit Score Required620500
Debt-to-Income Maximum - Standard50.00%43.00%
Debt-to-Income Maximum with Compensating Factors50.00%50.00%
Minimum Downpayment Required3.00%3.50%
Maximum Loan-To-Value Allowed97.00%96.50%
Maximum Combined Loan-to-Value Allowed1.051.25
First-Time Homebuyer Education RequiredNoNo
Minimum Age AllowedMinimum Legal AgeMinimum Legal Age
Maximum Age AllowedNoneNone
First-Time Home Buyers AllowedYesYes
First-Time Home Buyers OnlyNoNo
Low-Down Payment Mortgage ClassificationNoYes
Income Verification RequiredYesYes
Military Service RequiredNoNo
States AllowedAll StatesAll States
Homeowners Insurance RequiredYesYes
Escrow Taxes & Insurance RequiredRecommendedYes

Compare Mortgage Statistics

Loan FeatureConventionalFHA
Average Interest Rate: Last Year4.97%4.99%
Average Loan Size: Last Year$402,642$279,773
Average Approval Rate: Last Year70.51%75.02%
Market Share: Last Year69.70%17.97%
Purchase Mortgages Originated: Last Year3,442,038887,234

Compare Mortgage Products

Loan FeatureConventionalFHA
1-Year ARM AvailableYesYes
5-Year ARM AvailableYesYes
10-Year Fixed-Rate Mortgage AvailableYesYes
15-Year Fixed-Rate Mortgage AvailableYesYes
20-Year Fixed-Rate Mortgage AvailableYesYes
25-Year Fixed-Rate Mortgage AvailableNoYes
30-Year Fixed-Rate Mortgage AvailableYesYes
Temporary Buydowns AvailableYesRestricted

Compare Mortgage Insurance

Loan FeatureConventionalFHA
Funding Fee / Guarantee FeeNoNo
Upfront Mortgage Insurance PremiumNoYes
Annual Mortgage Insurance PremiumNoYes
Private Mortgage InsuranceYesNo

Compare Occupancy Rules

Loan FeatureConventionalFHA
Primary ResidenceYesYes
Second HomeYesRestricted
Vacation HomeYesNo
Investment PropertyYesNo
Non-Occupant Co-BorrowerYesYes

Compare Citizenship Rules

Loan FeatureConventionalFHA
U.S. Citizen AllowedYesYes
Permanent Resident Alien AllowedYesYes
Non-Permanent Resident Alien AllowedYesYes
Foreign National AllowedYesYes
Buyers With Diplomatic Immunity AllowedYesYes

Compare Credit Rules

Loan FeatureConventionalFHA
Credit Scoring ModelTri-mergeTri-merge
Non-Traditional Credit References AllowedYesYes
Deferred Student LoansLesser of 5% of balance or monthly paymentActual Payment or 0.5% of Loan Balance
Deferred Debt CalculationLesser of 5% of balance or monthly paymentLesser of 5% of balance or monthly payment
Pay Off Medical Collections Prior To ClosingNot RequiredNot Required
Pay Off Non-Medical Collections Prior To ClosingNot RequiredRequired when collections exceed $2,000
Bankruptcy, Chapter 72-Year Waiting Period2-Year Waiting Period
Bankruptcy, Chapter 134-Year Waiting Period1-Year From Filing
Short Sale4-Year Waiting Period3-Year Waiting Period
Foreclosure7-Year Waiting Period3-Year Waiting Period
Judgments & Liens AllowedMust be satisfiedMust be satified
Federal Income Tax Delinquency AllowedMust be satisfiedNo

Compare Property Rules

Loan FeatureConventionalFHA
Minimum Square Footage AllowedNo minimumNo minimum
Maximum Square Footage AllowedNo maximumNo maximum
Single-Family Residences AllowedYesYes
Condominiums AllowedYesYes
Non-Warrantable Condominiums AllowedNoNo
Co-ops AllowedYesYes
Townhomes AllowedYesYes
2-4 Unit Homes AllowedYesYes
Manufactured Homes AllowedYesYes
Fraternity and Sorority Houses AllowedNoNo
Tiny Homes AllowedYesYes
Modular Homes AllowedYesYes
Cob Homes AllowedNoNo
Shipping Container Homes AllowedYesYes
Condotels AllowedNoNo
Bed & Breakfast AllowedNoNo
Working Farms AllowedNoNo
Working Ranches AllowedNoNo
Houseboats AllowedNoNo
Log Homes AllowedNoYes
Geodesic Homes AllowedNoNo
Timeshares AllowedNoNo
Homes with Solar Panels AllowedRestrictedRestricted
3-D Printed Homes AllowedYesNo
Leasehold Estates AllowedYesYes
Mixed-Use Properties AllowedNoYes
Flood Zones AllowedOnly where insurableOnly where insurable
Properties With More Than 20 Acres AllowedNoYes
Properties with PACE AllowedNoNo

Compare Ownership Rules

Loan FeatureConventionalFHA
Inter Vivos Revocable Trust AllowedYesYes
Closing in a Corporation AllowedNoYes
Community Land Trust AllowedYesYes
Non-Profit Organizations AllowedNoYes
Municipal Government Agencies AllowedNoYes

Compare Income Rules

Loan FeatureConventionalFHA
W-2 Income AllowedYesYes
Self-Employment Income AllowedYesYes
Investment Income AllowedYesYes
Retirement Income AllowedYesYes
Trust Income AllowedYesYes
Social Security Income AllowedYesYes
Military Income AllowedYesYes
Rental Income AllowedRestrictedRestricted
Asset Depletion as Income AllowedYesNo
Offer Letter Income AllowedYesNo
Disability Income AllowedYesYes
Alimony and Child Support Income AllowedYesYes
Boarder Income AllowedNoRestricted
Accessory Dwelling Unit Income AllowedNoYes
Cannabis Industry Income AllowedYesNo
Automobile Allowance as Income AllowedYesYes
Housing Allowance as Income AllowedYesYes
Temporary Leave Income AllowedYesRestricted
Bank Statements as Income AllowedNoNo
Debts Paid By Others as Income AllowedYesNo

Compare Assets & Downpayment Rules

Loan FeatureConventionalFHA
Seasoning Requirements60 Days30 Days
Reserves RequiredNoNo
Cash Gift For Downpayment AllowedYesYes
Seller Concessions, Maximum3.00%6.00%
Salary Advance for Downpayment AllowedNoNo
Relocation Funds for Downpayment AllowedRestrictedRestricted
Gift of Equity AllowedYesYes
Sweat Equity AllowedYesYes
Crypto for Downpayment AllowedYesRestricted
Cash Value For Credit Card Rewards AllowedYesNo
Cash Value For Airline Rewards AllowedYesNo

Compare Loan Traits

Loan FeatureConventionalFHA
Assumable Mortgage AllowedNoYes
Trailing Co-Borrower AllowedYesYes
Maximum Properties Financed Allowed101
Flipped Homes AllowedRestrictedRestricted
Arms-Length Transaction RequiredYesNo
Occupancy Deadline60 days60 days
Delayed Financing AllowedYesNo
Prepayment Penalty AllowedNoNo
Termite Inspection RequiredNoYes
Power of Attorney AllowedYesYes
Repair Allowances AllowedNoNo
Gifts From Charitable Organizations AllowedNoNo
Sources: FHFA, FHA

Important Notice For Home Buyers

This mortgage comparison between conventional and FHA mortgages is subject to change without notice and may vary between lenders. The information provided here is based on official mortgage guidelines from the FHFA and FHA.

Individual mortgage lenders may have their own variation of these guidelines, called lender overlays, which could affect your mortgage approval process.

If you are turned down for a mortgage by one lender, it does not necessarily mean that you will be denied by all mortgage lenders. Different mortgage companies have different criteria, and it may be possible to get approved with another lender.

Consult with multiple lenders to explore your mortgage choices.

Find Out More: Conventional and FHA Mortgages

Eager to learn more and make an informed decision? Dive into the details by visiting our comprehensive conventional Mortgage and FHA mortgages guides. And when you’re ready to move forward, start your mortgage pre-approval at Homebuyer.com.

Pre-approved buyers do better. Get started now.


       This guide to Conventional vs FHA mortgages compares the similarities and differences of two popular first-time home buyer mortgages.

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