When you apply for a home loan, you can apply for a government-backed loan (such as an FHA, VA or Rural loan) or a conventional loan, which is not insured or guaranteed by the federal government.
A government-backed loan is a loan subsidized by the government, which protects lenders against defaults on payments, thus making it a lot easier for lenders to offer potential borrowers lower interest rates. Its primary aim is to make home ownership affordable to lower income households and first-time buyers.
An experienced Mortgage Loan Officer can help you make that decision after running your credit and viewing your financial documents.
Conventional VS. FHA Rules:
|Borrower has higher credit score||Borrower has lower credit score|
|Minimum down payment 5%||Minimum down payment is 3.5%|
|Loan has higher interest rates||Loan has lower interest rates|
|Max Loan Amount $424,100.||Max Loan Amount decided by County|
|DOES NOT have to be Owner Occupied||HAS to be Owner Occupied|
|NO Down Payment Assistance||Down Payment Assistance Programs|
|NO Mortgage Insurance if 20% down OR once loan is paid down to 78% loan to value (LTV)||Upfront and monthly Mortgage Insurance payment for life of the loan|
|Portion of Down Payment can be a gift||100% of Down Payment can be a gift|