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Sometimes, the simple questions are the most revealing. Why choose an FHA mortgage loan? Why not choose a conventional mortgage, VA loan, or USDA? Compared to conventional mortgages, FHA loans have more forgiving credit requirements.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

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FHA.com is a privately owned website, is not a government agency, and does not make loans.

Why Choose an FHA Home Loan?

December 2, 2020

Why Choose an FHA Home Loan?
Sometimes, the simple questions are the most revealing. Why choose an FHA mortgage loan? Why not choose a conventional mortgage, VA loan, or USDA?

Compared to conventional mortgages, FHA loans have more forgiving credit requirements thanks to the government-backed nature of the FHA loan program.

Your down payment requirements are also lower and these are the two deciding factors for some borrowers--the amount of the downpayment is a serious issue and while you may be able to find down payment assistance that can apply for a conventional mortgage? Down payment help is also offered by local agencies for FHA mortgages, too.

Down payment help on a smaller down payment would seem to be an easier “sell”. An agency that offers to help you with your down payment has more ability to do so when your required money down is 3.5% (FHA loans) versus a larger requirement (10% or higher depending on circumstances, the lender, and your credit scores) on a non-FHA mortgage.

FHA Loan Features

FHA loans have some standard features that conventional mortgages don’t necessarily include. One of those? It is illegal to be charged a penalty for paying off an FHA mortgage early. This is a standard part of the FHA loan program. FHA mortgages have a refinance option called Streamline Refinance which has no FHA-required credit check or appraisal and the goal of these loans is generally to provide a benefit to the borrower in the form of a lower interest rate or monthly payment.

FHA mortgages don’t allow your lender to charge you more than the actual amount charged for services rendered for appraisals and other loan costs.
 
Your lender is not allowed to charge you, the borrower, for fees associated with the lender’s use of a lawyer (you DO have to pay for your own use of legal help), and FHA home loans have foreclosure avoidance measures which are mandatory for lenders to consider when deciding how to proceed with a borrower trying to get back on track after missing payments.

Other Loan Types?

Why choose an FHA mortgage over a USDA home loan or a VA mortgage? Aren’t these also government-backed mortgages? Yes, they are. But USDA loans for single-family borrowers have need-based income restrictions and other requirements. These USDA loans are need-based mortgages and not open to all applicants.

VA mortgages are not need-based loans, but are restricted to those with qualifying military service and in some cases, surviving spouses. These loans are also not available to the general public.

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