While mortgage rates are low, people are eager to get the home buying or refinance process started. So, if you’re ready to take advantage of these historically low rates, but you don’t know much about what loan products are available, keep reading. It can be hard to tell which loan is best for your particular situation. Talk to a mortgage advisor today or get a free rate quote to compare your options.
What is an FHA loan?
An FHA loan is a loan that is insured by the Federal Housing Administration. The FHA loan cuts home buyers some slack. If you are a first-time homebuyer or have a less-than-perfect credit score, the FHA loan’s liberal requirements could open the window of opportunity to your new home. The FHA understands not everyone looking to buy a home has a perfect financial situation.
In recent years, the FHA loan has grown in popularity since the requirements tend to be less strict compared to conventional loans. If you can’t put a large amount down on a home or if putting down a sizeable amount scares you, the FHA loan program offers lower down payment options compared to conventional mortgages. In some cases, the younger generation is loaded with student loan payments, but the FHA loan makes home ownership achievable.
On the flip side, FHA loans tend to have higher interest rates and higher closing costs compared to conventional loans. Because of low down payment options, you’ll have to pay Mortgage Insurance Premium (MIP) in addition to your monthly payment.
What is a Conventional Loan?
A conventional loan is a loan not guaranteed or insured by any government agency. If you are planning on staying in your home for a while, a conventional loan might be for you. There are typically higher credit and income requirements for conventional loans compared to FHA loans. Conventional loans tend to have lower interest rates compared to FHA loans.
There are several different loan terms to choose from. vLoan offers 10-, 15-, 20- and 30-year fixed-rate conventional mortgage terms. Typically, the faster you plan to pay off your mortgage, the lower the interest rate and you’ll pay less interest over time.
With a conventional loan, a larger down payment is not always necessary but is favorable. An easy rule of thumb: the higher the down payment, the more likely it is that a conventional loan is the right choice for you (lower rates and lower monthly payments).
Can I refinance my FHA loan into a conventional loan? Absolutely! Once you’ve gotten settled in your home, you may refinance your FHA loan to a conventional loan to lower your monthly payment, reduce or remove your MIP or shorten or lengthen your loan term.
In the end, there’s nothing like talking to a mortgage advisor to help you through the process. Here at vLoan we will help you along the way. Everyone’s situation is different and we want to help you find the best fit. We look available programs and your unique situation to ensure you are presented with the best options.
If you think one of these is a perfect fit for you, you might be right. If you’re ready to take the next step you can apply now!