FHA or Conventional: What You Need To Know

🏡 REI Quick Tip: FHA vs. Conventional — What’s the Deal?

You’ve found a property, you’re ready to finance it, and now the lender asks: FHA or Conventional? And you're like… can I phone a friend?

Let’s break it down without the jargon salad.

✅ FHA Loan: The Government’s Soft Hug

• Backed by the Federal Housing Administration

• Low down payment (as little as 3.5%)

• Lenient credit standards (great for newer borrowers)

• Required mortgage insurance — for the life of the loan

• Primary residences only — no investment properties allowed

• Stricter property condition standards

Who it’s for:

First-time buyers, lower-credit applicants, or someone house hacking (living in one unit of a duplex, etc.).

✅ Conventional Loan: The No-Training-Wheels Option

• Not government-backed (but regulated)

• Down payments start at 3%, but 20% avoids PMI

• PMI can be canceled when equity hits 20%

• More flexible for property types — including investment property

• Stricter credit and income requirements

Who it’s for:

Buyers with good credit, investors, or anyone planning to hold a rental or flip.

🧠 Quick Tip for Investors:

FHA is not your go-to for flips or rentals (unless you’re living in the property first). Conventional loans offer more long-term flexibility — especially when building a portfolio.

📊 Final Thought:

Think of FHA as your starter home loan and conventional as your scaling-up tool. Know your goal. Pick your tool.