Which Type of Loan Works Best For You?

If you’re in the beginning stages of your home hunting process, you’ve probably thought about talking to a mortgage lender. After submitting all of the paperwork, your lender will give you an idea of your budget for a mortgage…and what type of mortgage you can qualify for. The most popular mortgages are FHA and Conventional, and they each have their relative pros and cons.

 

  FHA Pros: FHA loans are backed by the government, and they’re generally intended for people who may not otherwise qualify for a mortgage. Folks with less-than-stellar credit scores, and lower down payments (as low as 3.5% with an FHA mortgage) are often the best candidates for these types of loans. You’re also likely to achieve a lower interest rate than you would with a conventional loan.

     FHA Cons: Their drawbacks? You might have a few more gov’t stipulations to deal with, and you’ll have to pay an upfront mortgage insurance premium, and mortgage insurance throughout the life of the loan.

    Conventional Pros: Conventional loans are intended for borrowers with higher credit scores and higher down payments available. You’ll need a minimum of 620 to achieve a Conventional loan, but it could be a great choice because there are better terms and far fewer stipulations.

    Conventional Cons: The drawback, of course, is that it’s harder to qualify. You’ll also have to put down a higher down payment (usually 5% or more) and you could be paying a higher interest rate than you would with a FHA loan.

Source: Everyhome.com