FHA Loans vs. Conventional Home Loans
The main difference between an FHA Loan and a Conventional Home Loan is that an FHA loan allows a lower down payment, and the credit qualifying criteria for a borrower is not as strict. This allows those without a credit history, or with minor credit problems to buy a home. FHA requires a reasonable explanation of any derogatory items, but will use common sense credit underwriting. Some borrowers, with extenuating circumstances surrounding bankruptcy discharged 2-years ago, can work around past credit problems. However, conventional financing relies heavily upon credit scoring, a rating given by a credit bureau such as Experian, Trans-Union or Equifax. In most cases with conventioal loans, if your score is below 640, you probably will not qualify.