A conventional home loan is a loan that isn’t guaranteed by any government agency like the VA, FHA, or USDA. However, these loans still have to conform to certain guidelines.
An FHA (or Federal Housing Administration) loan is guaranteed by the government. Because it’s guaranteed, it’s less risky for lenders, and they can lower their qualification requirements.
FHA loans are ideal for borrowers with lower credit (below the standard 620 cutoff for a conventional loan) or who don’t have much money available for a down payment (especially if some of their down payment money is being gifted to them). In some cases, an FHA loan may be the only way someone can buy a home.
Credit score: 620
Down payment: At least 20% to avoid mortgage insurance, but you can get a conventional loan with as little as 3% down.
Bankruptcy/foreclosure: You’ll need to wait seven years after a foreclosure and four years after a bankruptcy to be eligible.
Credit score: At least 500, but lenders may require 580 or higher.
Down payment: Only those with scores of 580 and above qualify for putting 3.5% down. Those with lower scores must put at least 10% down.
Bankruptcy/foreclosure: Need to wait three years after a foreclosure and two years after a bankruptcy to be eligible.
Qualifying income: With an FHA loan, you can also use the income of a non-occupant co-borrower to qualify for the loan. Their income and debt will be blended with yours.
With a conventional loan, you pay monthly private mortgage insurance (PMI) if you put less than 20% down on the home. The amount you pay is risk based, which means that those with high credit scores pay less, and those who put a higher percentage down pay less (if you put 10% down, you’ll pay less than if you put 5% down).
Even if you do need mortgage insurance, it drops off once the loan is down to 78% of the value of the home.
With an FHA loan, you’ll pay an upfront mortgage insurance premium at closing. The amount is 1.75% and is typically bundled with the loan amount. You’ll also pay an annual premium for the life of the loan, and that amount varies depending on several factors, but it’s around .50 to 1%. You can’t get rid of this cost unless you refinance to a different loan program.
Conventional loans have some restrictions on the origins of your down payment money. You may not be able to get a loan if all of your down payment is a gift from a relative.
FHA loans let borrowers use money from a non-profit, government agency, or relative to pay 100% of their down payment.
FHA loans can’t be used on investment properties or second homes. They’re also limited to the loan amount for your area. The amount in most places is $453,100.
Still not sure what kind of loan is best for you? Or are you ready to get started on an application? I’m here to help you make the decision that’s best for you and your finances, so please reach out!
“David Honda and his team rocked!! They had great technology that took so much of the pain of home buying away. They were attentive to our specific needs and were on top of our loan process! David was always available, even when he was in Hawaii, and super responsive! Thanks David, Melissa and the team for an easy and great home buying experience.”
- Raymond F.
“Faye helped me purchase my first home last year. She was very professional and worked very quickly to help me procure financing. She made herself available around my schedule and took the time to explain my options for financing to help me get the lowest rate possible. Would highly recommend her to anyone looking for someone that is professional, highly knowledgeable, polite, and responsive.”
- James Z.
“With this being my first home purchase, my loan officer was very good at explaining everything to me and helping me with all my needs. Thank you for having such great people in the right place!”
- Cathleen H.
“CSMC Mortgage took great care of us and our home buying needs. Tony was more than we could have ever asked for, he went above and beyond for us and we couldn’t have been more grateful for all his hard work. CSMC Mortgage has a great and friendly staff, I would highly recommend them to anyone looking into buying a home.”
- Jannet A.
“This review is about Mark and Darci Richardson from CSMC Mortage in Simi Valley. This team is the BEST! For the past 12 years our home was "underwater" due to the "crash" in 2007, and unable to do anything with the mortgage except pay it. These two kept on top of things and finally the house qualified to REFI. We just completed everything and it closed last week... and they saved us over $900 a month!! That's a huge savings for a couple of senior citizens! We are SO happy now and finally can breathe. Thanks to Mark and Darci and CSMC Mortgage for following through, jumping through all the hoops necessary and helping us out! I can't recommend them more... they are the BEST!!!”
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“These folks are conscience and easy to work with. The “calm” as the “storm” of home loans rolls through! I would not use anyone else. They make sure ALL your questions are answered, be that what competitors may have offered, or ads you may have heard or seen. What a pleasure to do business with. Thank you team CSMC.”
- Michael G.
“Baret Grigorian was amazing!! From start to finish Baret was there to help in every way. I never felt like I had to call him to follow up on my loan transaction and he always kept me informed. He was able to get me great financing rates, a lower payment AND money back! Thank you Baret!! I look forward to working with you again in the future!!”
- Kenny D.
“I had the best experience with CSMC Mortgage. Buying a home is very stressful with all of the paperwork that has to be filled out. Faye was amazing! I have given several people her contact info, who are scared to take the step to homeownership. She took ALL of the stress away for me. I honestly, didn’t have to do much. She accommodated my crazy work schedule and help me get things done in a timely manner. She made me feel so comfortable and at ease. There were no surprises when it was time to sign and pay. I highly recommend her to anyone in need of her services and guidance. I can’t thank her enough.”
- Lisa M.