Mortgage in House Financing
The FHA vs. conventional loan battle is widely debated when it comes to buying houses and condo units. Purchasing a house or a condo is such a hard one, especially if you do not have the enough resources to pay in full. If you really need a house and your money is not enough to purchase one, you can avail of some housing loans out there. There are two popular loan kind you can have that are widely debated now. The FHA loan mortgage and the conventional mortgages are just two of the kinds of mortgages available for potential house buyers.
The FHA Mortgage Loan
The FHA mortgage package offered by the government owned Federal Housing Administration offers a cheap down payment requirement for each potential house buyer. The FHA vs. conventional loans may be determined by this factor. The minimum down payment needed for an FHA mortgage package is about 3.5%. It can be purchased at the price of $200,000. For a thirty-year term, a fixed 3.75% interest rate will also be applied. With the FHA mortgage, qualified buyers can have their own homes now even with a low down payment. FHA mortgage loans are also transferable or assumable. Meaning, when you decide to sell your house, the new occupant can now assume your payment terms instead of availing another loan which will add another pile of expenses for the buyer. FHA terms are also fixed for every potential client no matter how high or low your credit score is.
The Conventional Mortgage
Meanwhile, as the FHA vs. conventional mortgage loans battle continues, the conventional ones are offered at a higher down payment requirement. To avail of a conventional mortgage loan, the potential buyer must pay about 5% down payment. They also need to buy the mortgage at a price of $200,000. Interest rates are fixed at 3.75% same with the FHA loan. Conventional loans are almost the same with the FHA loans except for the down payment.
Conventional Vs. FHA Loan
Although FHA loans offer a cheaper down payment, it may seem to be more expensive because of the MIP or the Mortgage Insurance Premium that is charged on the top of your mortgage closing cost. This charge is added to the cost of your mortgage that’s why in turn, conventional loans appear to be cheaper. However, FHA vs. conventional debates still continue because of some varying payment capabilities.