An FHA loan is backed by the Federal Housing Administration and is offered through specific lenders, while a conventional home loan can be obtained by almost any lender and isn't backed by an agency, according to SFGate. FHA loans are also offered according to specific parameters.Continue Reading
While a person may not qualify for a conventional home loan with a credit score that's below 620, the credit requirements are a bit more lenient with an FHA loan, states SFGate. It's possible for a person to automatically qualify for an FHA loan with a 620 credit score. A person can be approved for an FHA loan a year after filing for Chapter 13 bankruptcy, which differs from the three or four years a person has to wait after filing for Chapter 13 bankruptcy to qualify for a conventional loan.
A higher down payment is required for a conventional loan, usually ranging between 10 and 30 percent of the home's total purchase price, as of 2015, notes SFGate. FHA loans usually require a down payment between 3.5 and 4 percent of the home's purchase price. A gift of money is an acceptable form of down payment for an FHA loan, but not a conventional loan.
If a person makes a down payment of at least 20 percent for a conventional home loan, he isn't required to have mortgage insurance, according to SFGate. Mortgage insurance is added to monthly payments and as a closing fee with an FHA loan.Learn more about Credit & Lending