You’ve been looking for a new home and considering the possible ways to finance it. You know you’ll need to take out a mortgage and have narrowed it down to either a conventional or FHA loan. However, you’re having some trouble deciding which one is best.
However, if you need the basic difference between the two loans, keep reading.
Conventional Home Loan
A conventional mortgage—also called a conventional fixed-rate mortgage—has a set interest rate for the life of the loan. You can get a conventional mortgage for 10-, 15-, 20-, or 30-year terms. A few of the benefits of a conventional loan include:
- Consistent interest rates
- Lower fixed interest rates than many other loan types
- Less documentation required for approval
- Speedier processing
- Refinancing available (if you determine you want to change the terms)
Note that conventional loans typically requires at least a 5 percent down payment and often 20 percent or higher.
An FHA loan is a mortgage insured by the Federal Housing Administration. With this type of loan, mortgagees play mortgage insurance to the lender, which provides a safety net to lenders if the home buyer cannot follow through on the loan terms. Many buyers opt for an FHA loan for the following reasons:
- Don’t require perfect credit scores
- Lower down payment requirements
- Attractive interest rates
- Flexible qualification standards
The FHA loan is often popular for first-time home buyers or households whose housing costs take a large portion of their monthly income.
Find Out More
To find out whether a conventional or FHA loan is best for your home purchase, contact GVC Mortgage today at (317) 564-4906. GVC Mortgage has helped Indiana home buyers in and around Carmel, Indianapolis, Fishers, Westfield, Noblesville, and the surrounding areas since 1996. Let us schedule a time for you to meet with one of our loan professionals and find the right financing option.
photo credit: Housing Market via photopin (license)