What is a common requirement for FHA loans that is not typical for conventional loans?

FHA loans are designed to support homebuyers who may have lower credit scores or less cash available for a down payment. One of the standout features of FHA loans is the allowance for lower down payment amounts, typically around 3.5% of the purchase price for qualifying borrowers. This is a significant benefit for those who may struggle to save for larger down payments, which is often required in conventional loans where down payment amounts can range from 5% to 20% or more.

In the context of FHA loans, the approach creates accessibility for first-time homebuyers and those with less robust financial profiles, making homeownership more attainable. Borrowers under conventional loans generally face stricter requirements related to credit and down payments, which can limit options for many prospective buyers. Thus, the flexibility of lower down payment requirements uniquely characterizes FHA loans compared to conventional financing.