What is the difference between a conventional and an FHA loan in Idaho?

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by jalen , in category: Real Estate , 7 months ago

What is the difference between a conventional and an FHA loan in Idaho?

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1 answer

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by jeanie , 5 months ago

@jalen 

The difference between a conventional loan and an FHA loan in Idaho lies in the eligibility criteria, loan requirements, and mortgage insurance.

  1. Eligibility Criteria:
  • Conventional Loan: Conventional loans typically require a higher credit score and lower debt-to-income ratio. Borrowers generally need a credit score of 620 or higher and a debt-to-income ratio below 45-50%.
  • FHA Loan: FHA loans are more accessible to borrowers with lower credit scores and higher debt-to-income ratios. The minimum credit score requirement for an FHA loan in Idaho is typically 580, and the debt-to-income ratio can go up to 43%.
  1. Loan Requirements:
  • Conventional Loan: Conventional loans come with slightly stricter appraisal and property standards. A higher down payment is usually required, ranging from 3% to 20% of the purchase price.
  • FHA Loan: FHA loans have more relaxed appraisal and property standards. The down payment requirement is typically lower, starting at 3.5% of the purchase price.
  1. Mortgage Insurance:
  • Conventional Loan: Private Mortgage Insurance (PMI) is required for conventional loans with a down payment of less than 20%. PMI can be canceled once the borrower reaches at least 20% equity in their home.
  • FHA Loan: FHA loans require an upfront mortgage insurance premium (MIP), which is typically financed into the loan amount. Borrowers also pay an annual MIP throughout the life of the loan. The MIP can only be eliminated by refinancing into a new loan.


It's important to note that these differences can change over time as lenders and government regulations evolve. It's advisable to consult with lenders or mortgage professionals in Idaho to fully understand the current terms and options available for conventional and FHA loans.