| With mortgage rates being at record lows, many | | | | * Low down payment required - FHA loans generally |
| people are ready to purchase a home or refinance | | | | require as little as 3.5% down on the purchase of a |
| their existing mortgage. If you are one of the many | | | | home. Government requirements also feature some of |
| Americans who want to take advantage of one of | | | | the lowest amounts needed to close a loan, potentially |
| the best times in many generations to buy or | | | | leaving more money in your pocket at closing. |
| refinance, you are probably weighing the loan options | | | | * Easy Refinancing - Refinance up to 97.75% of your |
| that are available to you. | | | | home's value. FHA also offers an FHA Streamline |
| If you are a first-time home buyer or have not thought | | | | which allows you refinance with no appraisal and |
| about your existing mortgage in years, it may be hard | | | | minimal credit requirements. |
| to tell which loan type will be the best for your situation. | | | | Benefits of a Conventional Loan vs an FHA Loan |
| Two of the most common loans right now are | | | | * Most competitive mortgage rates - Due to the FHA |
| conventional, fixed-rate mortgages & the | | | | approving loans for borrowers with lower credit, there |
| government-backed FHA loan. Each loan offers unique | | | | is a greater risk associated with those types of loans, |
| features that benefit different situations. Knowing | | | | meaning the rates are generally slightly higher. Good |
| some of the advantages and drawbacks of both | | | | credit requirements for conventional loans offer |
| loans will help make your decision easier: | | | | borrowers lower rates when compared to FHA loans. |
| Similarities between Conventional & FHA loans | | | | * No MIP at closing - FHA loans come with mortgage |
| * Both loans currently offer some of the lowest rates | | | | insurance premiums (MIP) that are built in over the |
| in history. 15-year conventional fixed-rate mortgage | | | | course of the loan. When you close, there's also a |
| rates are at an all-time record low. FHA rates are | | | | one-time upfront mortgage insurance premium due - |
| slightly higher but in general, rates are competitive and | | | | currently 2.25% of the total loan amount. Conventional |
| comparable. | | | | loans do not require this upfront premium. |
| * The most popular FHA & conventional loans are | | | | * Flexible terms - Conventional loans offer several |
| fixed-rate mortgages. That means the interest rates | | | | repayment period terms. Different repayment terms |
| won't change for the life of your loan. | | | | offer different, more competitive mortgage rates. The |
| * However, both conventional & FHA offer ARMs | | | | faster your term, the lower your rate. Choose |
| (adjustable rate mortgages). | | | | between 10-, 15-, 20-, 25- or 30-year repayment |
| Advantages of an FHA Loan over a Conventional | | | | periods. FHA loans generally do not offer as many |
| Loan | | | | options. |
| * Credit qualifying criteria not as strict - Credit scores | | | | If you have less than perfect credit and don't have |
| as low as 580 now qualify for an FHA loan. | | | | enough for the standard 5-20% down payment, an |
| Additionally, your allowable debt-to-income ratio is | | | | FHA loan may be the better option for you. If you |
| higher on an FHA. Meaning, if the amount of debt you | | | | have good credit, a stable job and a sizable down |
| carry is relatively high compared to your income you | | | | payment - you could save more money over the life |
| may still qualify for an FHA loan. | | | | of your loan by going with a conventional option. |