Have you ever compared FHA loan vs conventional loans? Most people don’t know the difference, and never really worry about it until they choose to look into buying a home, especially if you’re first-time home buyers. There are many similarities in loans on the market today, but it is the differences that you need to pay attention to most.
If you want to buy a house in the future, whether that means a few months or several years, it is essential that you understand these loans and what they offer. Here is an overview of their similarities and their differences to help you understand what each type of loan offers.
FHA Loan VS Conventional Loans: What Is the Same?
When looking into buying a house, you will need a mortgage unless you have a lot of money saved or you find some type of personal contract option with someone selling their home. You will also need money that is used as a down payment on the home. Plus, in order to qualify for that home, you will need to have sufficient credit. These are determining factors in whether or not you will be able to get a loan from a financial institution.
Every mortgage outside of VA loans needs some type of down payment. Different loans have different percentages of money that you must put towards the purchase price, but many financial institutions like it when first-time homebuyers in Houston have at least 10-20% down. This is not a requirement, but simply a nudge in your favor if your credit is less than perfect or you are getting a larger mortgage than the financial institution thinks you should.
You will also need to have sufficient credit to show that you can and will pay back the loan. Your credit history is a set of numbers that represents how well you manage money, how well you pay your bills, and if you put money aside. The more you pay your bills on time, save money, and do not over-extend yourself financially, the higher your credit is likely to be. This is good, since each type of loan has a minimum credit score to apply. The higher that number is, the easier getting a mortgage of any type will be.
What Is Unique About FHA Loans?
FHA loans are set up for first-time homebuyers in Houston or any other part of the United States. They are set up in a way that makes getting a home a bit easier for those recently out of college or relatively early in their careers. They accept credit ratings that are slightly lower; all the way down to 500 is accepted in some cases. Plus, they allow a prospective first time homebuyer to put just 3.5% down towards the purchase price of a new home if their credit score is over 580.
For the lower end of the credit scores, they look for 10% down or more. This allows people with lower levels of savings to buy a home that they can live in and pay for over the course of 10, 15, or 30 years. Some mortgages even allow for up to 40 years, but those are not always available.
What Is Unique About Conventional Loans?
A conventional loan often has stricter requirements, but it depends on the home, the buyer, and how much debt that person has. The minimal credit score for a conventional loan is often no lower than 620, but as always, the higher the better.
They will go down to just 3% down if the score is higher, but for lower credit, they often want at least 10% of the purchase price of the home in the form of a down payment.
To Compare FHA Loans Vs Conventional Loans, Let Rock Mortgage Help
When you want to compare FHA loan Vs conventional loans, call us here at Rock Mortgage. We will take the time to explain the similarities and differences of each type of loan. Plus, we can break down the pros and cons of each when looking at your specific situation.
The more preparation you have going into the mortgage process, the easier it is to understand and the more likely you are to get the type of loan that works best for you. Reach out to us today and let us help you find the type of mortgage that will best suit your needs.
FHA Loan Vs Conventional Loans: Find Out Which Loan is Best for You | Rock Mortgage — Houston, Texas