1. Down Payment
FHA: As low as 3.5% if credit score ≥ 580. Conventional: Minimum 3%–5% down (but often 5%+ to be competitive).
Example: On a $400,000 home:
FHA: ~$14,000 down Conventional: ~$20,000 (5%) or more
2. Credit Score Requirements
FHA: More flexible – can go as low as 580 (sometimes even 500 with 10% down). Conventional: Usually need 620+, but best rates come at 740+.
3. Mortgage Insurance (PMI/MIP)
FHA: Has upfront fee (1.75%) + monthly mortgage insurance for the life of the loan. Conventional: PMI required if <20% down, but drops off once equity hits 20%.
4. Property Condition Rules
FHA: Strict—house must be move-in ready and meet safety standards. Conventional: More flexible—can finance fixer-uppers, even if not perfect.
5. Who Each Works Best For
FHA: Great for first-time buyers with lower credit or smaller down payment. Conventional: Better for buyers with stronger credit and more cash reserves, or for properties that need work (like this one).
Why This Matters for Your Buyer
Since this property is not FHA eligible:
Your buyer will need to switch to conventional (if they don’t have cash). That means: More money upfront (higher down payment). Stricter credit requirements. But they can buy fixer-uppers (which FHA won’t allow).
Bottom line:
If your buyer is a first-timer relying only on FHA, this property is probably not for them. If they have savings and good credit to go conventional, they can still compete. Investors are at an advantage here since they typically use cash or conventional already.
