Do you need a mortgage loan, but don’t know how to choose between an FHA loan and a conventional loan? Selecting the right mortgage program can be confusing and is crucial for getting the best deal on your mortgage loan.
FHA Loans vs Conventional Loans
Differences Between an FHA Loan and a Conventional Loan
What Are FHA Loans and Conventional Loans?
An FHA loan is originated in the private sector, but it’s insured by the government through the Federal Housing Administration. This insurance protects the lender and not the borrower. A conventional mortgage loan is originated in the private sector and it’s not insured by the government. A conventional mortgage loan can also be insured. However, the coverage comes from a third party insurance company within the private sector. It doesn’t come from the government.
Whether you apply for an FHA loan or conventional loan, you’ll have to apply through a mortgage lender that operates in the private sector. You’ll have to meet the lender’s minimum requirement for approval and you’ll have to clear their underwriting process too.
Loan Qualification Criteria
To qualify for an FHA loan, you’ll have to meet the lender and the government’s criteria. FHA loan is managed by the Department of Housing and Urban Development (HUD), which is part of the federal government. FHA loans are insured by the government guaranteeing that the lender will be repaid, even if the borrower defaults on the loan.
Down Payment and Credit Score
FHA loan requires a low down payment and low credit score as compared to conventional loans. This is why FHA loans are popular for first-time homebuyers. If you’re a first-time homebuyer, then an FHA home loan is for you. However, FHA loans can be used for refinancing a home loan as well. This requires minimal paperwork. The processing time required for FHA loans is negligible as compared to conventional loans.
If your credit score is low and you don’t have enough for a down payment, an FHA loan may be the better option for you. If you have good credit, a stable income, and a sizeable down payment, then you could save more money over the life of your loan by choosing a conventional loan. If you’re confused which loan to choose that best fit your financial needs, Drew Mortgage Associates, Inc. can help! Drew Mortgage Associates, Inc. is a mortgage lender in MA that can assist you with mortgage loans and guide you through the application process. They can help you get a home loan with a low-interest rate that best suits your financial goals. Our mortgage planners are highly trained professionals that can identify the best mortgage program that’s right for you.