FHA vs Conventional Loan

Hi, I’m Britany Linton from New American Funding
and welcome to Get Mortgage Fit. Today we’re going to talk about two common
types of loans. An FHA and a Conventional Loan. Have you ever wondered what the difference
is between the two? An FHA Loan is a mortgage that’s guaranteed
by the federal government. The FHA, or Federal Housing Administration,
doesn’t issue loans but the agency does provide mortgage insurance that makes it easier for
lenders to approve loans. This loan is popular, especially with many
first time home buyers because it has flexible lending guidelines. It’s one of the easiest loans to qualify for
if you have less than perfect credit. That means, if you’ve had bankruptcy or foreclosure
you can still finance a home if you meet the right guidelines. Usually with an FHA Loan, you can have a lower
FICO score and a lower down payment. Also, a family member can give you gift money
to cover your downpayment costs. The FHA even allows a relative or close friend
who isn’t going to live the home to be a co-borrower to help you qualify. With an FHA Loan, you can also have a higher
debt to income ratio but one requirement to keep in mind is that the home you want to
finance has to be your primary residence. You can’t finance rental property or other
property types. On the other hand, a Conventional Loan meets
the traditional loan standards set by Fannie Mae and Freddie Mac. It is not insured by the federal government. It’s a loan that allows you to buy a property
residence, secondary home, or a rental property. You aren’t limited to only purchasing a main
home. Typically with a conventional loan, borrowers
should have a higher credit score. Lenders usually prefer a 20% down payment
but you can go as low as 3% down. A conventional loan is usually less expensive
if you’re able to qualify. But to find out which loan program is right
for you speak with a loan officer to compare your options. Thanks for watching this episode of Get Mortgage
Fit and keep watching our series to improve your mortgage health.

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