Shopping for a Mortgage? Find the Perfect Home Loan!
If you are in the market to buy a home you can either choose a conventional loan or an FHA loan. Both can prove to be valuable tools in the home buying process. FHA loans have several benefits. One of the main ones being they allow you to save money. A conventional loan also has some benefits. Deciding which one to go with can be a very tough decision for anyone buying a home.
Below I am going to share with you a few benefits and a few drawbacks of both FHA loans and conventional loans.
First lets talk about conventional loans. One of the biggest advantages to conventional loans is they don’t come with all the stipulations you will usually find with FHA loans. For instance, if you choose to refinance or you sell your home and you have an FHA loan, you will lose all of the money you saved. And when you consider prepayment penalties you may end up paying more in the long run. With conventional loans the rules and regulations aren’t as strict. That means you have more options and more freedom.
However, that isn’t necessarily a good thing. There are quite a few things that could be looked at as a disadvantage to using conventional loans. For one, conventional loans are extremely difficult to qualify for. This is because they are not backed by the government. Instead the lender bases everything on your credit history and your word that you will pay it back. With an FHA loan the government is backing it. That means you are more likely to be approved. With a conventional loan the only thing that qualifies you is your own merit.
Now let’s talk about FHA loans. As you can imagine, there are a lot of benefits to choosing an FHA loan over a conventional loan. The first one being your down payment will be much lower. With conventional loans the down payment you have to pay upfront is extremely high. This is one of the main things that keep people from qualifying.
With an FHA loan the down payment is very low. So low in fact that almost anyone can qualify. Another advantage is the ability to get a lower interest rate. Remember, this is a government backed loan. Therefore they can provide you with a low interest rate. As a result you will be able to save quite a bit of money over the life of your loan.
Another advantage is the approval process. FHA loans get approved more than conventional loans. If you have less than stellar credit your chances of approval are better with an FHA loan. You can also get different payment options that better fit your situation.
Now for some of the drawbacks to using an FHA loan. The biggest drawback is the fact that it is a government program. Anytime you deal with a government program there is a lot of unnecessary stuff you have to do. They want to know every detail about your personal business. There are a ton of guidelines and regulations you will have to adhere to. Sometimes government loan programs can be one big hassle you would rather avoid.
Are you considering to take out new debt in the form of a conventional or FHA loan? Compare mortgage rates of some of the top lenders across the country and secure a rock-bottom rate today!