What is the difference between fha and conventional loans?
An FHA loan is a loan that is partially guaranteed by the Government. It offers less of a down payment and usually a slightly higher interest rate than normal prime loans. It is normally used by first time buyers.
FHA loans have mortgage insurance in most cases that can also increase your payment.
Underwriting guidelines are less stringent on FHA loans and require a manual underwrite of credit instead of relying strictly on your credit score. Sometimes, non traditional credit is utilized, such as rental history, to stamp an approval on your loan.
Seller assistance is also a plus with FHA loans. They may contribute up to 6 % to the buyer and sometimes more with donations to non profit organizations.
Prime (traditional) loans normally require a down payment and rely on a more traditional credit score model. Mortgage insurance may not be a necessity and interest rates may be lower.
My best suggestion is to have your lender show you good faith estimates on several loan products so you may see the benefits of each.