Kentucky Conventional Loan versus Kentucky FHA Loan comparison chart


via Kentucky Conventional Loan versus Kentucky FHA Loan comparison chart

Conventional loans – these are secured by Fannie Mae or Freddie Mac and they’re also responsible for setting the program guidelines. This is one of the most common loan programs people choose when buying a house.

Conventional loans have a First Time Home Buyer option that allows for as little as 3% down. Thetypical down payment for a Conventional loan is 3-5% and with a 20% down payment can avoid PMI (Private Mortgage Insurance) completely.

Conventional loans require a 620 minimum FICO score and allow debt-to-income ratios as high as 50%. They can be more challenging to qualify for than some of the other programs and the interest rates are very credit sensitive, meaning that the lower the credit score the higher your rate will be. PMI is also credit score based, so the lower the scores the higher the mortgage insurance rates will be as well.

Ideally suited for: 2nd home or investment property purchase. 10% or more down, or somebody with excellent credit.

 

FHA loan – FHA mortgages are the second most common program when buying a house. This is a HUD/government-backed program and was originally created for people with fair to good credit or higher debt-to-income ratios. FHA loans allow down to a 520 credit score but you’ll often need a higher score to get a loan approved.

FHA loans require a minimum down payment of 3.5% and have competitive interest rates (often better than Conventional loans), regardless of credit score. FHA allows up to a 57% debt-to-income ratio, making it easier to qualify.

Typically, a borrower with 580-680 credit would be best suited to go with an FHA loan because the interest rate will often be lower and the MIP (Mortgage Insurance Premium) on an FHA loan is based on the loan amount and is not credit score driven.

Ideally suited for: less money down, under 720 credit and/or higher debt-to-income ratios.

 

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