COMPARISON BETWEEN FHA LOANS AND CONVENTIONAL LOANS

1.) Conventional loans require a minumum credit score of 580 where as FHA loans allow for lower credit scores and non-traditional credit reports

2.) Most conventional loans require some amount of liquid assets (usually 2 to 6 months of their principle and interest payments) where as FHA loans do not require reserves

3.) Any licensed appraiser may appraise homes for conventional financing but only appraisers from a FHA approved list may be used for FHA loans

4.) Underwriters for conventional loans do not need any special designation except for proper training where FHA underwriters need to be "DE" approved through the Department of Housing and Urban Development

5.) Through conventional financing, loans for rehabilitating houses are not allowed. The FHA allows financing of rehab loans and allows repairs to be done with loan funds with its section 203(k) program

6.) For loans in default, the GSE’s may turn to the lender for a buyback, and the lender may decide to pass that cost on to the originator. On the other hand, the FHA will generally not make a lender buy back the loan. In turn, the FHA will look to their approved underwriter associated with bad loans.