the main differences between FHA and
conventional loans is the mortgage insurance. Mortgage
insurance is required on every loan unless you put down 20 percent or more
of the down payment Mortgage insurance is just insurance that
insures the lender against you in case the home is taken
back or foreclosed on and if the lender resells the home and
loses money it's an insurance policy that pays for it. We don't like mortgage
insurance it's not something that a buyer wants to pay but it's a necessary evil on the
conventional loan mortgage insurance is paid until you've insured yourself, so you have
twenty percent equity in the homes. Once you have that you can
apply to have the mortgage insurance dropped on the FHA loan mortgage insurance is
paid for the life of the loan regardless of how much equity you have otherwise the FHA loan has a lower
interest rate and its easier to qualify for.
It also
requires less money down so it's a really great program say for a
first-time homebuyer or for somebody where maybe you can't
document your income quite as well as you need to. The conventional on
the other hand has a little bit higher interest rate it's a little bit harder to qualify for
but it can provide a lower payment simply because mortgage insurance is less.
If you have more to put down the
likely option is gonna be the conventional loan because the the more you put down the
lower your percentage of mortgage insurance is..
