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What's the Difference Between Government and Conventional Loans?

fha versus conventionalWhat's the difference between conventional and government loans? The main answer is simple, but the program disparities can be radical. In short, a conventional loan is not insured by the government, and a government loan is insured by the government. Both types of loans have their distinct advantages and disadvantages:

Conventional

Conventional loans (including jumbo loans) offer both adjustable and fixed rates to borrowers, and the loans can be non-conforming or conforming. The rates are usually low, and only have a private mortgage insurance (PMI) requirement if there is less than a 20% down payment on the home.  Conventional loans are known for having a speedier loan process, so taking out a conventional loan is a good bet if you need to have your loan quickly. However, conventional loans require a minimum 5% down payment and have stricter credit standards than their government counterparts. 

Government

Government loans (FHA, USDA or VA loans) may have higher interest rates and often require the borrower to pay some sort of mortgage insurance. VA loans are a great exception to the rule, but borrowers must have served in the military without dishonorable discharge. Generally, government loans have lower credit score and down payment requirements than conventional loans, and usually have lower closing costs associated with the home purchase.  Government loans are therfore a great option for first time home buyers due to their lower qualifying requirements.

Today's Low Rates

PROGRAM RATE APR
30 Year Fixed 3.875% 3.93%
15 Year Fixed 3% 3.06%
5/1 Arm 3.5% 3.672%
All rates shown with 0 points
Assumptions

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