FHA vs Conventional Loan: Complete 2025 Comparison
Understand the key differences between FHA and Conventional loans to choose the best mortgage for your Bergen County home purchase.
| Feature | FHA Loan | Conventional Loan |
|---|---|---|
| Minimum Down Payment | 3.5% (580+ credit) | 3-20% (typically 5%+) |
| Minimum Credit Score | 580 (500 with 10% down) | 620 |
| Mortgage Insurance | MIP: Permanent (<10% down) | PMI: Removable at 80% LTV |
| Bergen County Loan Limit (2025) | $766,550 | $766,550 |
| Interest Rate (Current) | 6.125% | 6.400% |
| Property Requirements | Must meet HUD standards | Standard appraisal |
| Seller Concessions | Up to 6% of sale price | Up to 3-9% (varies by down payment) |
| Best For | Lower credit, minimal savings | Stronger credit, more down payment |
Detailed Comparison: FHA vs Conventional
Down Payment Requirements
FHA Loan
- • 3.5% minimum with 580+ credit score
- • 10% minimum with 500-579 credit score
- • On $749,714 home: $26,240 down (3.5%)
- • Gift funds allowed from family
- • Down payment assistance programs accepted
Conventional Loan
- • 3% minimum (first-time buyers, excellent credit)
- • 5-20% typical for most buyers
- • On $749,714 home: $37,486 down (5%)
- • Gift funds allowed with proper documentation
- • PMI required if less than 20% down
Credit Score Requirements
FHA Loan
- • Minimum 580 for 3.5% down
- • 500-579 requires 10% down
- • More forgiving of past credit issues
- • Bankruptcy: 2 years after discharge
- • Foreclosure: 3 years waiting period
Conventional Loan
- • Minimum 620 (most lenders)
- • 740+ for best rates
- • Stricter credit history review
- • Bankruptcy: 4 years after discharge
- • Foreclosure: 7 years waiting period
Mortgage Insurance (PMI vs MIP)
FHA MIP (Mortgage Insurance Premium)
- • Upfront MIP: 1.75% of loan amount
- • Annual MIP: 0.55-0.85% depending on loan amount/term
- • Permanent if less than 10% down
- • 11-year MIP if 10%+ down
- • Cannot be removed without refinancing
- • On $723,474 loan: ~$330-500/month
Conventional PMI
- • No upfront cost (unless borrower-paid)
- • Annual PMI: 0.30-1.50% based on credit/LTV
- • Removable at 78% LTV (automatic)
- • Request removal at 80% LTV
- • Cancels with appreciation or refinance
- • On $712,228 loan: ~$225-890/month
Bergen County Example ($749,714 Home)
FHA Loan Scenario
Conventional Loan Scenario
Monthly Payment Difference: $32/mo higher for Conventional, but PMI is removable after ~5-7 years. FHA MIP is permanent unless you refinance.
Frequently Asked Questions
What is the main difference between FHA and Conventional loans?
The main differences are: FHA loans require only 3.5% down with 580 credit score but have mandatory mortgage insurance for life (unless you put down 10%+). Conventional loans require 3-20% down with 620+ credit and PMI can be removed at 80% LTV. FHA is government-backed; Conventional is not.
Which loan type has lower down payment requirements?
FHA loans have the lowest down payment at 3.5% with a 580+ credit score (or 10% with 500-579 score). Conventional loans require 3% minimum down but only for first-time buyers with excellent credit. Most buyers need 5-20% down for Conventional.
Can I remove PMI from an FHA loan?
FHA mortgage insurance is permanent if you put down less than 10% (lasts entire loan). If you put down 10% or more, MIP is removed after 11 years. Conventional PMI automatically cancels at 78% LTV or can be requested for removal at 80% LTV through refinancing or appreciation.
Which loan is better for Bergen County homebuyers?
Depends on your situation: FHA is better for buyers with lower credit (580-619) or minimal savings (3.5% down). Conventional is better if you have 620+ credit and 5%+ down, as PMI is removable and rates may be lower. With Bergen County median of $749,714, consider long-term costs of permanent MIP vs removable PMI.
Not Sure Which Loan Is Right for You?
Schedule a free consultation with Jimmy Joseph MBA to compare loan options for your Bergen County home purchase.
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