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Dan Green

Written by Dan Green

Dan Green

Dan Green (NMLS 227607) is a licensed mortgage professional who has helped millions of people achieve their American Dream of homeownership. Dan has developed dozens of tools, written thousands of mortgage articles, and recorded hundreds of educational videos. Read more about .

Compare Homes - Conventional Vs Fha

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Updated: September 22, 2024

Conventional vs FHA: Compare Side-by-Side

This guide to Conventional vs FHA mortgages compares the key differences and similarities between two popular first-time home buyer mortgages to help you choose the best loan for your home purchase.

The Differences Between Conventional and FHA Mortgages

Choosing the right mortgage is crucial for a first-time home buyer. The two most popular mortgages for first-time buyers, Conventional and FHA mortgages, share some features but also differ in several important 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 follow FHFA mortgage guidelines and loan limits, while non-conforming mortgages, often referred to as jumbo mortgages, exceed these limits.

These loans are available in fixed-rate (30-year, 20-year, 15-year, 10-year) and adjustable-rate options, offering flexibility in terms and payment plans. To qualify, home buyers generally need:

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

Highlights: FHA Mortgage

FHA loans, insured by the Federal Housing Administration, are designed to make homeownership more accessible and affordable, especially for first-time buyers. FHA loans have been supporting home buyers since 1934 by offering mortgage default insurance to banks.

FHA mortgages are available in 30-year and 15-year fixed-rate, or adjustable-rate formats, subject to specific loan limits. Key features include:

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

These more flexible guidelines make FHA loans suitable for those who may not qualify for other loan types, offering opportunities for 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 Allowed105%100%
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 comparison between Conventional and FHA mortgages is based on official mortgage guidelines from the FHFA and FHA. The details may change without notice and can vary between lenders.

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

If a lender denies your mortgage application, it does not mean all lenders will. Different mortgage companies have different approval criteria, and you may be approved by another lender.

Consult with multiple lenders to explore your mortgage options.

Find Out More: Conventional and FHA Mortgages

Eager to learn more and make an informed decision? Explore our comprehensive guides on Conventional Mortgages and FHA Loans. When you’re ready to proceed, start your mortgage pre-approval at Homebuyer.com.

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

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