Home Loan Options

For many people, understanding the many different home loan programs  can be tough  especially since there are many different home loan programs that a home owner  can choose from.

Two of the most common mortgage programs are Conventional Home Loans.

Many home buyers are unsure whether to go with a FHA home loan  compared to a conventional loan.  Each borrower ‘s situation is different so what is good for one home owner might not be the best option for the other person.

It is important for the person to understand the differences between FHA home mortgage loans and conventional home loans so that you are getting into the right mortgage loan  for your particular situation.

For the most part, FHA is designed for a first time home buyers, but anyone can have a FHA mortgage .  Each person is limited to only one FHA home loan  and you cannot do a FHA mortgage loan  on an investment property.  Conventional home loans  can be used to purchase a primary, second or investment home.  Both FHA mortgage loans and conventional loans can be used to purchase or refinance a house . 

Down Payment Differences

FHA does require a smaller down payment, but the closing cost for a FHA home mortgage loan is higher due to the upfront MI fee which is currently 2.25% of the loan amount.  Conventional mortgages do not have an upfront MI fee.  The current FHA down payment minimum is at 3.5% down while conventional loans require at least 5% down.

Credit Score Differences

Credit scores also have a limited impact on a FHA mortgage which can be great for someone whose credit score is between 620-680.  Conventional home mortgage loan rates vary due to credit score.  The lower the score, the higher the rate on a conventional mortgage.  Also, if you credit score is below 680, you might not be able to get approved for Private Mortgage Insurance.  If PMI is not approved, then you must have a down payment of at least 20%.

FHA does require an escrow account while conventional mortgages do not as long as you have at least 20% down.

Mortgage Loan Size Differences

FHA home limits are set by HUD, for example in most of Texas, the upper limit FHA loan is $271,050.  Conventional loans have a maximum home mortgage loan limit of $417,000 for most states.

There are many other factors in deciding on a mortgage loan program.  It is important to contact a loan mortgage consultant to see which home mortgage loan program best meets your needs.