What is the difference between an FHA loan and a Conventional loan for a house?
which one is better? which one is easier to get? which one is worse?
Tags: between, conventional, difference, House, Loan
Read more about the FHA Loan here.
which one is better? which one is easier to get? which one is worse?
2011/07/03 at 21:09:53
The best thing to do is to talk with an good experienced loan officer and ask them- in your case which is best.
There are lots of differences. The most common differences that stand out to most people are that it is often easier to qualify on FHA and that a seller is allowed to contribute more to buyers closing costs on FHA. The FHA down payment is quite a bit less. So that buyers that have little money often want to go FHA.
If you have a lot of money and can put at least 20% down then FHA probably is not best for you because the fees will be higher than the other loans you can get.
2011/07/03 at 21:01:45
An FHA loan is one that insured by the Federal Housing Administration, and only requires a down payment of 3.5%. A conventional mortgage usually requires at least 20% down. An FHA loan is good for people looking to purchase their first home, but do not have the money for a 20% down payment. However, the reduced down payment will require private mortgage insurance (PMI) until 20% equity has been built (value of home is more than 20% higher than amount owed on mortgage). Also conventional mortgages can also have slightly lower rates than FHA loans.
I myself got an FHA loan as I purchased my home with 0% down and seller paid closing costs when those programs still existed. I did pay PMI for the first few years, but switched to a conventional mortgage this year after refinancing, as the renovations I have done to the home since I bought it raised its value to where I had more than 20% equity built up. If you have the money available for the down payment, then a conventional mortgage is the way to go. FHA loans do give you some more options however.