What Kind of Loan Is Right For You?

Conventional vs FHA Insured Mortgage Programs
You may hear a lot of terms flying around as you start on your search for buying a home, and it’s not always easy to understand what all is behind them. Here are descriptions of two commonly offered mortgage programs and what they will generally entail. If you have questions or want more information, a good way to start would be by paying a local loan office or our mortgage center.

Conventional Loans
A conventional loan is any mortgage not guaranteed or insured by the federal government.  They require a down payment of 5-20% of the price of the home. Interest will vary by plan, which come in10, 15, 20, 25, 30, and 40-year-long programs. However, you usually have two main interest rate options: fixed and adjustable. Fixed rates will never fluctuate, and you will pay the same amount every month for the life of the loan. Adjustable rates will generally start lower, but may change over the life of the loan. The initial rate can generally be locked in for periods of 3, 5, 7, or 10 years. The maximum amount you can borrow varies by county, but usually falls between $400,000-700,000.

In order to qualify for a conventional loan, you must have good credit, although the exact standard is flexible and varies by plan. They will look closely at patterns of income, monthly expenses, and credit spending and weight that more heavily than individual rough spots.

FHA Insured Loans
FHA Insured Loans are funded by FHA-approved private lenders, and the lender is then insured by the Federal Housing Association. Because the lender will be reimbursed by the FHA should the borrower default, the lender is able to offer more lenient qualification requirements. The maximum mortgage limit varies between $68,000-150,000 depending on the cost of living in the area you’re looking in. Loan costs can vary significantly from one lender to the next, so if you opt for an FHA loan, you should shop around a little. Things to keep in mind while doing this are interest rates, discount points, closing costs and fees (such as lock in fees), and annual percentage rates.

This option is often recommended to first-time buyers and lower income buyers because it requires only a modest down payment, has low closing costs that can be included in the loan, and credit qualifying is relatively easy.