FHA Mortgages offer several advantages over conventional mortgages, particularly for applicants without perfect credit or lots of cash on hand for a down payment.
Conventional mortgages usually require a much bigger down payment than FHA Mortgages. (Usually 20% down for conventional mortgages, 3.5% down for FHA Mortgages.) If you have less than perfect credit, chances are you won’t qualify for many conventional mortgage programs. If you do qualify, you might find yourself being offered higher interest rates and/or fees than you expected. FHA mortgage programs offer many benefits and protections that you won’t find in conventional conforming mortgages including:
FHA vs Conventional Loans
FHA Loan Credit guidelines are not completely score driven. They are written in a way that provides the borrower the benefit of the doubt that there had been circumstances beyond their control in their past. Provided the borrower has recovered from those circumstances in a reasonable manner, they’re generally going to be credit-eligible for an FHA Mortgage. A 640 FICO credit score is usually required to obtain an FHA Loan Approval.
FHA Loans Have Low Rates, Low Mortgage Insurance
Another advantage of FHA Mortgages, as compared to a conventional mortgages, is great interest rates and lower monthly mortgage insurance (MI). Standard FHA Mortgage interest rates are usually better than a conforming 30-Year Fixed mortgage.
FHA Loans have smaller down payments than Conventional Loans
FHA Loan Qualifications only require a 3.5% down payment and the money can be a gift from a family member, employer or charitable organization, which other programs don’t allow.