A Breakdown of Conventional vs. FHA Loans in King County

benefits of conventional vs. fha loans in king county
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Buying a home is a very exciting step in your life, but could seem daunting and overwhelming if you have credit hurdles or a low income. Here’s what you should know if you’re weighing whether conventional vs. FHA loans in King County is the best way to go.

A Breakdown of Conventional vs. FHA Loans in King County

What is a conventional loan? What is a FHA loan?

One of the first things to know about Conventional vs. FHA loans in King County is that a conventional loan is a mortgage that is not insurance by any government agency, while an Federal Housing Authority (FHA) loan is backed by the government. In simple terms, FHA loans are popular among first time homebuyers and millennials since it has lower requirements when it comes to credit score and down payment.

Credit Score

With conventional mortgage loans, home buyers are required to have a 620 or higher credit score. With FHA loans, scores as low as 580 are acceptable to qualify for a mortgage. It is important to note, the higher your credit score, the lower your mortgage rate for both conventional and FHA loans in Pierce County.

Down Payment

With conventional loans, a 20% down payment is typically required by the home buyer. However, talk with your lender as they may be able to lower the bar to 10% based on your circumstance. With an FHA loan, a down payment as low as 3.5% is acceptable to qualify for a home loan. For first time home buyers who haven’t saved much, the FHA mortgage loan makes it possible for them to obtain a home loan.

Mortgage Insurance

One of the largest benefits of a conventional loan is that because the home buyer pays 20% down, the mortgage insurance can be canceled since the loan to value ration reached 80%. If you pay less than 10% for your conventional loan down payment, monthly insurance payments are required until you reach a loan to value ratio of 80%. The biggest down side to FHA loans comes in the form of monthly mortgage insurance payments. While it’s wonderful to be able to qualify for a loan with 3.5% down, it means monthly payments, sometimes for the duration of the mortgage term, are required.

Loan Limits

It’s a common misconception that FHA loans are for low income borrowers only with credit challenges. In a market such as the booming Seattle Tacoma market, the FHA loan limit is nearly $700,000. That does not scream low income borrowers.


Conventional mortgages generally present fewer hurdles in terms of processing and inspections. While FHA loans can be advantageous for some home purchases, some sellers don’t want to deal with the challenges involved with the FHA loan process and it’s borrowers. In a competitive bidding situation where sellers have many offers to choose from, this can but the buyers at a disadvantage.

You may also like: Now Is The Time to Buy a Home in Pierce County.

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