FHA v Conventional
Becoming a first time homeowner can be a confusing and intimidating experience. When in unfamiliar territory you may be getting a bit of overload on the information and programs that are out there and available to you. Let’s start by explaining the difference between two of the most popular mortgage programs many first time homebuyers are choosing.
An FHA insured loan is a loan that is guaranteed by the Federal Government. They do not lend the money, but they insure the loan for you which makes it easier for lenders to approve you. An FHA insured loan allows you take advantage of low interest rates, and down payment as low as 3.5%.
Qualifying for an FHA loan is much easier than conventional . You will need acceptable credit scores for both programs and will need to provide the same amount of documentation that is required by both, but the requirements for FHA are quite lenient. This means that even if you have a blemish on your financial record, you still may qualify for an FHA loan. There is a hefty MIP (Mortgage Insurance Premium) fee which can be paid upfront or added onto the mortgage. Sometime this hefty payment lessons the amount you can qualify for.
Conventional loans require 20% down in order to avoid mortgage insurance. Mortgage Insurance protects the mortgage company if the homeowner were to default on the payments. One of the biggest misconceptions is that mortgage insurance protects the borrower, and it does not. Conventional Loans are usually sold to Fnma or Freddiemac, and follow their guidelines in order for approval. These guidelines can be much more strict than FHA.
Before you even begin looking at homes, you will need to get prequalified. With a prequalification you will get an idea of how much you can afford and you will also be able to make sure you meet the lender’s requirements. Prequalification is fast and easy here at RATESAREHOT.com and it does not cost you anything. This makes RATESAREHOT.com your perfect first step into homeownership. Once you have been pre-qualified, you are free to start searching for the home of your dreams.
