Deciding which loan is best for you is always the hardest. There are lots of considerations to make and in the end making the right choice add up to ease of repaying the loan. There are many options with our various partners, the thing is whichever you choose it will impact your financial status for years. Among the most popular home loan types are FHA and Conventional but which one is right for you – FHA or Conventional?
What are Conventional Mortgages?
This type of home loan is the one that Freddie Mac or Fannie Mae (government-sponsored enterprises) will purchase. Amount of the loan for this year is about $453,100. Conventional conforming loan limits are being evaluated each year to determine this base loan maximum amount. The basis for the amount is fluctuations in the average U.S. home price.
Minimum down payment for a conventional mortgage is around 3 percent of the cost of the home. However, since this is below 20 percent you have to pay private mortgage insurance. The rate varies depending on the lender and the loan. Also, you have the option of removing such insurance if you only have 78 percent of the home’s value left on the mortgage.
What are FHA Mortgages?
This type of loan is usually for first-time homebuyers, however, it is also available for everyone. Credit Score qualification for this type of loan depends on various institution and lenders. The Federal Savings Bank, for example, has a 600 credit score qualification for FHA Loans. It is a requirement of the Federal Housing Administration that each home meets their standards for safety and building codes.
FHA loans have two mortgage insurance premiums. The first must be paid at the time of purchase and is 1.75 percent of the loan. The second is paid annually and depends on the down payment and the length of the loan.
FHA or Conventional
Which best suits you then – FHA or Conventional? The answer to this typically depends on what you need.
In case you are you are looking for a second home, a vacation property, a house you intend to fix up and flip in a month or one you plan to rent out then go for a Conventional Mortgage.
If you need a primary residence then you can either go for an FHA loan or a Conventional Loan.
If you are looking for a low down payment then an FHA Loan is very ideal since the minimum is 3%. Conventional mortgages are typically best for people with good credit and who can afford to put down a larger down payment – the standard is 20 percent.
Still can’t decide? Well, if you want additional help in making a decision then we can help you. We can refer you to one of our partners which will give you assistance to make that vital decision.
FHA or Conventional? Let us help you with that, contact us.
Reference: Fairfax County Times