| Applying for Home Loans: The Basics | | | | bracket requirement. With private loans, there is no |
| Aside from the huge costs involved in paying for a | | | | such stipulation - but the interest rate will be more or |
| house in full, there are additional financial benefits that | | | | less based on what your credit rating is. |
| you will get to enjoy by applying for a home loan or a | | | | 2. FHA loans have a lower upfront down payment as |
| mortgage loan. With it, you can use your money wisely | | | | compared to conventional loans. |
| in such a way that you can utilize your instant cash for | | | | The minimum down payment that you need to make |
| other purposes. Although you have incurred a debt, | | | | for FHA loans is 3.5%, while conventional loans require |
| you can manage your finances in such a way that | | | | at least 20% down payment. |
| there will be enough funds left to fulfil your other needs | | | | 3. FHA closing costs are lower as compared to |
| after you have paid for your monthly mortgage | | | | conventional loans. |
| premiums. | | | | When you apply for an FHA loan, the closing costs |
| Keep in mind, however, that there are different kinds | | | | are controlled by the Housing and Urban Development |
| of mortgage loans that you can take advantage of - | | | | regulations. If you do not qualify for an FHA loan, make |
| which is offered by a variety of financial institutions. | | | | sure to ask the lender upfront about the closing costs |
| Just like any other financial product that you can take | | | | so there will be no surprises later on. |
| advantage of, it is a must for you to make a | | | | 4. With FHA loans, underwriting is not as strict as with |
| comparison of the fees and closing costs involved in a | | | | private loans. |
| particular loan - otherwise you'll be paying more than | | | | FHA loans can be given to a borrower as long as he |
| you have to. | | | | or she can afford it, and the house will be used as |
| FHA Loans versus Conventional Home Loans | | | | primary residence. Unlike private lenders, FHA is more |
| Now that you already have an idea about the basics | | | | concerned about your ability to repay rather than |
| of applying for a home loan, how can you decide | | | | measuring your credit worthiness. |
| which loan to take advantage of? Basically, you can | | | | 5. Other differences between FHA and private loans. |
| take your pick from federal government-backed loans | | | | As compared to conventional loans, the income |
| and private loans. An example of the first type is the | | | | requirement of FHA loans is lower. The mortgage |
| home loan offered by the Federal Housing | | | | insurance is also lower as compared to private loans. |
| Administration. Read on to find out how one compares | | | | Also, should you decide to pay your FHA loan in |
| with the other: | | | | advance, there will be no penalties. |
| 1. FHA loans are suited for Americans who are under | | | | By making a comparison of the pros and cons of |
| the lower income bracket while private loans do not | | | | these two types of mortgage loans, you can make a |
| have such qualifications. | | | | more financially viable decision. However, the FHA |
| The reason why FHA loans are offered in the first | | | | does have more borrower-friendly terms - so you |
| place is that its goals is to make the average | | | | might want to check if you qualify for that first before |
| American family able to purchase a home which they | | | | checking out privately funded loans. |
| cannot afford otherwise, thus the lower income | | | | |