Conventional 97 Loan Guide — Home.Loans

How Does a Conventional 97 Compare to FHA Loans?

Conventional 97 loans are often compared to FHA loans, and with good reason. Both loan types are designed to make it easier for individuals to purchase a home without a large down payment, and in many cases they both make home ownership possible for people that wouldn’t be able to get a more standard loan. Because of the lower down payment required, some claim that Conventional 97 loans are “better” than FHA loans, but this entirely depends on your situation.

If you have decent credit and don’t mind being locked in to a 30-year loan, the Conventional 97 might be a better option for you. If your credit is less perfect or you want a bit more flexibility when it comes to your loan options, though, you might be better off with an FHA loan instead. Your Conventional 97 will get you a lower down payment and give you a chance to cancel your mortgage insurance down the road, but the FHA loan will likely give you a better interest rate over the course of the loan term. There are a lot of things to consider when trying to choose which one is the “better” option for you.

Because of this, it’s difficult to make a direct comparison between the two loan types. While they obviously have similarities such as requiring low down payments, there are enough differences that you can’t just pick a single data point (such as the down payment) and declare one loan program superior to the other.

What About VA and USDA Loans?

There are other government-backed loans besides FHA loans that you might qualify for. Some of these are even more appealing than the Conventional 97 since in some cases they offer as little as 0% down on their loan products. The two most prominent of these are loans from the Veterans Administration (VA) and rural development loans from the United States Department of Agriculture (USDA).

As with the FHA loans, a direct comparison between Conventional 97 loans and VA or USDA loans is difficult because of the differences among the loan products. VA loans are available only to individuals who have served in the Armed Forces (and their families), so many potential home buyers wouldn’t qualify for these loans at all. Likewise, USDA loans are available only for properties located in rural areas and are available for some properties that you couldn’t purchase with a Conventional 97.

Instead of comparing these loans and trying to figure out which one is “best” across the board, it’s a much better idea to look at your specific situation and try to match it with the loan that will best meet your needs. Whether it is a VA loan, a USDA loan, an FHA loan, or a Conventional 97, the time you spend matching a loan product to your circumstances will go a long way toward finding the loan that most closely lines up with what you actually need from a loan product.

Conventional Loans: In Review