For homebuyers considering purchasing a home using an FHA loan, the hassle may outweigh the advantages. Although the government has taken steps to streamline the process, its still a bit of a pain and has additional requirements that a conventional lender does not.

On the upside, an FHA loan will allow those with lower credit scores, a prior bankruptcy and even a past foreclosure as long as you have maintained excellent credit since.

The downside is that there are additional fees, an on-site inspection and few options. If you have the ability to scrape together an additional 2% down payment and have a good credit score, you can forgo the government red tape and qualify for a conventional loan at 95% of the purchase price. Loan fees will be lower and interest rates will be more attractive as well. You can also choose between 30,10, and 5 year fixed rates.

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