FHA mortgage loans are issued by federally qualified lenders certified by the U.S. Federal Housing Authority, a division of the U.S. Department of Housing and Urban Development.
FHA loans should be considered when the borrower has a lower credit score (below 680) or other credit issues that have not had time to season such as bankruptcy, foreclosure, or short sale. Some key differences between FHA and Conventional loans you should know about:
- Generally easier to qualify for than conventional loans.
- They require monthly mortgage insurance no matter how much you put down.
- Require a 1.75% (of the base loan amount) up-front mortgage insurance fee. This gets tacked onto the base loan amount to give you a final loan amount and is thus financed.