Federal Housing Administration (FHA) and conventional financing loans are undoubtedly the most common ways of getting money to purchase a home.
An FHA loan is for you if you are either asset- or credit-challenged, or both, as the minimum down payment is just 3.5%. Very few lenders, however, will fund FHA loans to buyers without a minimum credit score of 640.
According to the website LoansGuide.org, an FHA loan doesn’t require a minimum monthly income, but it does require the buyer to have no delinquent federal debts and to have steady employment.
The drawback to an FHA loan is that mortgage insurance premiums are much higher than with conventional loans.
Conventional loans are typically for borrowers who have more money to put down on a home and have better credit scores.
They require a down payment of between 5% and 20%.
Conventional mortgages typically require two months of asset reserves for mortgage, taxes and property insurance.
There are a number of types of conventional loans – from fixed and adjustable rate to biweekly.
Whatever your situation, talk to your mortgage professional about your options with regard to the two programs. A mortgage professional can help you make the best choice.