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Conventional Loan Benefits
A Huge advantage of conventional loans is that they often do not come withas many requirements for documentation like that of FHA. Through prepayment penalties and other costs, it may actually cost you more. The rules and regulations are far less strict with conventional loans in many cases. For example, with FHA loans, if you refinance or sell your house, you will lose all of the money that you saved by going into it in the first place.
A Conventional loan vs.FHA loan can both be ideal tools when you are in the looking to purchase a house. FHA loans can be a significant savings for you as well as offering several other benefits.This is not to say that conventional loans dont have benefits. When deciding to use an FHA loan or a conventional loan it can sometimes be difficult. Here are a few drawbacks and benefits of each one.
Conventional Loan Drawbacks
You can find many things that would be considered a drawback with a conventional loan. For one thing, it takes much more to qualify for a conventional loan. The bank is basing everything on your personal credit, financials and guarantee. With an FHA loan, the government is standing behind the loan, so you are more likely to be approved. With conventional loans, you will be forced to qualify based on your own creditworthiness.
FHA Loan Drawbacks
The FHA is a government program and anytime you deal with government programs, you know that there will be some problems. As with any loan, they jhave their guidleines that need to be followed closely to ensure you fund and on time. You will incur prepayment penalties and other things that you may not have with a conventional mortgage lender.
FHA Loan Benefits
FHA loans have many benefits over conventional loans. For one thing, the down payment on the house will be much lower. The down payments are low enough that almost anyone can qualify. With conventional loans, you may need a lot of money in savings in order to make the down payment to get the house.
Another advantage of FHA loans is that you can secure a lower interest rate. Since the government is backing the loan for you, they will also provide you with a lower rate. Anytime you can secure a low interest rate, it is definitely to your advantage. You can save thousands of dollars over the life of your mortgage.
The approval process is also different for this type of loan. The FHA will approve more applications than a traditional lender. If you have questionable credit, you may be approved by the FHA when you would not be approved by a regular lender.
FHA loans also has more flexible repayment terms available. You can get a loan with a number of different repayment options and payment plans. Whether you want a 30-year fixed rate mortgage or a reverse mortgage, the FHA has options for you.
As always, please contact the Gregg Knight team with any Mortgage needs or go to www.approvingsocal.com
