Today I am talking about the differences between FHA and conventional loans. I always recommend that you speak to the lenders regarding financing because every lender has a different loan program and you never know which one you might qualify for or what might be the best based on your situation.
But on average in Illinois for an FHA loan you have to have a minimum of 3.5% down and a minimum credit score of 580. But with FHA you have to pay private mortgage insurance, so you will pay monthly for this extra insurance to insure that you are going to pay the loan back, based on the lower credit and lower amount down. So that adds to your monthly payment which can be a negative. The benefit of an FHA loan, and some clients don’t feel this is a positive, but they have their own criteria of what the property must meet in order to pass FHA what they call inspection. They don’t necessarily do an inspection like a home inspection, but they have a checklist of criteria that needs to be met in order to be able to qualify you for your loan. So things such as; there cannot be any chipping or peeling paint, working appliances, that makes the property either habitable or uninhabitable.
Conventional loans do not have inspections like FHA loans. You can get approved for a conventional loan with those things; with no appliances, it doesn’t matter. There is no PMI with conventional loans, so you don’t have that private mortgage insurance. The minimum score on a conventional loan is 620. Now some lenders may have different criteria and that’s why I always recommend that you speak with a lender. I have a list of preferred providers on my website which you can find by clicking here. If you want to talk about anything else real estate related please call/text me at 708.268.0462.