Posts Tagged ‘Conventional Loan vs FHA Loans’
Conventional Loan vs. FHA Loans
The current events seem to tell us that this is not the right time for us to get a loan to build our dream home. But that should not be the case. We should not be discouraged as long as we have been properly informed with our choices and our options on where to get our loans. To help you with your discernment, let me tell and compare you on two of the most commonly known loans that are being used: conventional loans vs. FHA loans.
For the past few years, most people are leaving out conventional loans vs. FHA loans. FHA is a lot more popular than the latter. But why is that? Let us enumerate the differences between the two.
Conventional loans are usually given by private lenders such as banks or mortgage companies. But such loans are usually imposed high interest rates by these companies. But to enable these companies to lend loans to home owners and buyers at much affordable rates, the US government created the Fannie Mae and Freddie Mac. These are called GSE or government sponsored enterprises and are funded with federal money that they would be lending to these private institutions to ensure stability and liquidity in the mortgage and housing market.
The guidelines of conventional loans vs. FHA loans are a lot stricter. FHA would only require the borrower to pay a 3.5% minimum down payment whereas private lenders giving out conventional loans require a borrower to pay a minimum down payment ranging from 5 to 10 percent. Read the rest of this entry »
