CONVENTIONAL
FHA
FHA loans are mortgages administered by the US Department of Housing and Urban Development and insured by the Federal Housing Administration (FHA). The insurance from the FHA protects the lender if a borrower defaults on the FHA loan. With this protection, lenders are able to provide loan options commonly not offered through conventional financing. Because of their low down payment requirements, FHA mortgages are often well suited for first-time home buyers.
For home buyers with limited funds for a down payment or a rougher credit history, the FHA mortgage could provide the solution they need in home financing. Compared to conventional mortgages, FHA loans typically offer more flexible underwriting, more lenient debt to income requirements and looser conditions for past collection or pay off accounts. With the ability to currently go down to a 600 credit score, FHA loans typically are set with 30 year fixed rates.
First-time home buyers might be well-served with the FHA loan. For first-time home buyers, saving enough funds for a substantial down payment can be one of the most challenging parts of buying a home. Since FHA loans can offer as low as a 3 percent down payment and also allow home buyers to roll closing costs and other fees into the loan amount, these might be a wise mortgage option for first-time home buyers.