A conventional loan is often obtained through a bank, credit union, or mortgage broker and is not backed by the government. They require at least 5% down, although 20% is considered ideal.
Benefits of a conventional loan include:
• Flexibility to purchase an investment or vacation property
• Option to choose between fixed and adjustable interest rates
• Faster approval and processing times
There are potential drawbacks of a conventional loan as well:
• Higher down payment amounts may be difficult for some
• Stricter credit requirements can make it harder to qualify
FHA loans are mortgage loan types that are government-insured and require just 3.5% down and have much more lenient credit requirements than conventional loans.
FHA loans are beneficial for a number of reasons, including:
• Minimal down payment requirements allow you to own a home with less upfront
• Credit requirements make owning a home possible if credit history is poor
• Streamlined refinancing makes refinancing simple
Like conventional loans, FHA loans also have some down sides:
• Mortgage insurance, which is required and added to the monthly payment
• Can only be used for a primary residence
• Have purchase price limits
Which loan is best?
Deciding the mortgage loan types that best suit your needs depends on your financial situation and goals. FHA loans are easier to qualify for, but mortgage insurance means you’ll likely end up paying more for the loan in the long term. If you’re unsure which one is best for you, contact one of NLC Loans’ personal mortgage advisors toll-free today at 1-877-480-8050. They’ll be happy to explain the details of each so you can make the decision that’s right for you.