FHA vs. Conventional Financing

Becoming a first time homeowner can be a confusing and overwhelming experience, especially when you are not familiar with the terms of different types of loans. When it comes to the type of mortgage you obtain, you generally can choose between conventional, private loans or FHA insured loans.

What is an FHA insured loan?

An FHA insured loan is a loan that is guaranteed by the Federal Government. They do not actually issue the money, but they insure the loan for you which makes you a much more secure borrower to private lenders. This in turn allows you take advantage of low down payments, low interest rates and easy approval.

How much does it cost?

With an FHA loan you have the opportunity to qualify for a loan with a low down payment of 3%. The FHA does charge a fee to insure your loan which is typically around 1.5% of the total cost of the loan, which can be worked into the final cost of the mortgage. You will also have to pay closing fees associated with the origination of the loan, but the FHA requires the lender to provide a Good Faith Estimate up front so you know what to expect at the end of the loan process.

Is it easy to qualify?

Yes. Qualification for FHA loans is much easier than with conventional loans. You will still need to provide credit scores, tax forms, a debt-to-income ratio and bank balances, but the requirements for these are quite lenient. This means that even if you have a blemish on your financial record, you still have the opportunity to qualify for an FHA loan.

Where do I start?

Before you even begin house hunting, it’s a good idea to get pre-approved for a loan. With a pre-approval you will get an idea of how much you can afford and you will also be able to make sure you meet the lender’s requirements. Pre-approval is fast, secure and does not cost anything, making it the perfect first step. Once you have been pre-qualified, you are free to start searching for your ideal home.

We would love to help you get started on the road to homeownership today. Take a minute to fill out our secure online form and we’ll be happy to help guide you through the loan process.

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