The main difference between an FHA Loan and a Conventional Home Loan is that an FHA loan requires: Lower Down Payment Credit qualifying criteria for a borrower is not as strict. This allows those without a credit history, or with minor credit problems to buy a home. FHA requires a reasonable explanation of any derogatory items but will use common sense credit underwriting. Some borrowers, with extenuating circumstances surrounding bankruptcy, discharged 2-years ago, can work around past credit problems. Conventional Loans Relies heavily upon credit scoring A rating is given by a credit bureau such as Experian, Trans-Union, or Equifax. If your score is below the minimum standard, you may not qualify. Requires more of a Down Payment If you have less than 20% as a downpayment the lender needs to get the top 20% of that loan insured in order to sell it on the secondary market.  That insurance is either done by the Lender or by private mortgage companies.  Either way, that is why a 20% downpayment is the typical milestone for buyers.