Conventional and FHA loans are among the most popular loan options, so you’re going to come across these terms when you’re preparing to buy a property or refinance your mortgage.

But did you know that these two are different? In this post, we are going to zoom in on the differences between FHA loans and conventional loans:

What Is An FHA Loan?

An FHA loan is an insured loan, meaning that the U.S. government guarantees the loan. As long as the borrower repays the loan according to the guidelines, the government will cover the loan in case the borrower defaults.

An FHA loan is a special loan program that provides homebuyers with financing options that can help them purchase a home with as little as 3.5% down. You can also get an FHA loan with no down payment.

These loans are also popular for borrowers who may have been turned down for a conventional loan, such as borrowers with lower credit scores. 

What Is A Conventional Loan?

A conventional loan is a term used to describe loans that the federal government does not insure, such as FHA loans. While conventional loans are not insured, they are still very popular.

When you have a conventional loan, you are responsible for paying the debt should you default on it. Therefore, conventional loans tend to have more strict guidelines.

As a result, conventional loans are typically reserved for borrowers with a better credit score and more funds to put down on their homes.

What Are Their Differences?

There are two main differences between an FHA loan and a conventional loan:

Credit requirements:

The most significant difference between the two is their credit requirements. FHA loans are available to borrowers with a lower credit score than conventional loans.

To be eligible for an FHA loan, your credit score should be 580 or higher, and you’ll need to show that you can make a down payment of at least 3.5% of the purchase price.

On the other hand, conventional loans require at least a 620 credit score. If you have not owned a home in the last three years, you’ll need a 640 score.

Down payment requirements:

Because conventional loans are for borrowers with a better credit score, conventional loans typically require a larger down payment. In addition, you will most likely be required to pay private mortgage insurance in case you cannot make the monthly payments.

The minimum down payment for a conventional loan is 5% ー unless you buy a home in a rural area. If you’re buying a home in a rural area, the minimum down payment is 3%.

With an FHA loan, you can get a mortgage with as little as 3.5% down. However, the home that you purchase must be in or near a specified “low-income” area.

The difference between these two loans can be massive. For example, you’ll pay an additional 1% to 1.25% on interest with the conventional loan.


FHA and conventional loans are both great options for would-be homeowners.

Keep in mind that there are many different loan programs out there, and it’s important to consider all of your options before deciding which loan is right for you.

If you’re interested in learning even more about FHA loans and conventional loans in Oklahoma or Florida, Cross Timbers Mortgage can help you. Contact us today to learn more about our finance solutions!