I do my homework asking questions about the flow of the market all the time since it constantly changes. Yes, I was referring to flexibility in terms of credit scores. Everyone should be aware that the credit score is your make or break factor in terms of qualifying for a specific loan. I believe mine is upwards of 770 something; last I checked earlier this year.

And yes, you are right, some convnetional programs do still require PMI, but most I have looked into for myself do not; which is why people stress putting 20% down as the safe preferred down payment method when buying a home. Who wants additional costs if you can avoid them long term?

When you say more “flexible”, I’m assuming that you are referring to credit scores. Yes, usually FHA loans require a 620 credit score, where MOST conventional programs (not all) require a credit score of 720. This is because an FHA loan is 100% backed by the government, so banks are more inclined to lend them to people with lower credit score (viewed as “higher risk”) because they know they will get their money back.

Keep in mind, however, that some conventional programs do actually require mortgage insurance. Usually if your loan is greater than 80% of your loan-to-value (basically, if you put less than 20% down) you will still have private mortgage insurance costs. This usually runs about a couple hundred dollars per month.

Another consideration about an FHA loan is that it is assumable. This means that when you go to sell your houses 5, 10, 15 years from now, someone can actually take over your loan. So if the interest rates when you’re selling in 2013, 2019 or 2023 are at somerthing crazy like 15%, you can not only sell your house, but you can offer your buyer to take over your mortgage, which is at 6%. This is another reason which makes FHA attractive.

Dave, your concluding statement is mostly correct. If you want to put a larger down payment then you obviously have more options then if you want to put a smaller down payment. However, it is no longer black and white that FHA will always be a lower down payment than conventional.

Each loan will generally have the same interest rates. However, FHA provides putting a lower down payment at only 3.5-5% compared to a Conventional loan that would require a larger down payment of 10-20%. Basically, FHA provides more flexibility in qualifying. Conventional loans though would not require PMI (private mortgage insurance) costs.

It really comes down to your decision of if you want to put down a larger down payment or not. If you do put down a large down payment, you’ll have a lower overall mortgage payment in the long term. You put down a smaller down payment, and you’ll have a larger overall mortgage in the long term.