Conventional loans are the most common type of mortgage done today, mostly due to the fact that they offer the lowest interest rates available. These are your 30-year fixed rate loans. They have the best rates and the best terms and are very straightforward in their requirements and in what they offer. The strict requirements for credit, proof of income and cash reserves make them the
hardest to qualify for but if you do qualify, you will have the lowest rates and best terms available.
But don’t be fooled into thinking that you have to have perfect credit to qualify. Even if you don’t think your credit is good enough, you may still qualify. And if you don’t, we can analyze your credit and let you know what to do so that you can improve your credit and then qualify for the best loan available.
Another misconception about conventional mortgages is that you have to have a 20% down payment when buying a home. The fact is that you can qualify with as little as 5% down, making it easier to qualify than you may think.
FHA is the Federal Housing Administration and although it is the government agency this program is named after, they don’t actually lend the money. Banks lend the money on the FHA loan program. This type of loan is easier to qualify for than your typical 30-year fixed rate mortgage. Credit requirements are easier, the minimum down payment is lower and they don’t require as much cash reserves. Often there are no cash reserves required at all.
An example of the difference in credit requirements is that on a conventional mortgage, any foreclosures or bankruptcies have to be at least 7 years old. On FHA loans, they only have to be 3 years old.
Additionally, FHA loans allow you to use alternative credit like utility bills and other regular payments if you don’t have enough accounts on your credit report.
The minimum down payment for FHA loans is 3.5%. These loans are useful for those who don’t have a large down payment or a ton of cash reserves.
With the increased flexibility on credit, reserves and a lower down payment requirement, FHA loans are much easier to get approved for. And the rates are normally very close to conventional loans.
The FHA Streamline is a fantastic program for those who are refinancing an existing FHA loan and are not pulling out any cash. The Streamline program is ideal for those who just want a lower rate than what they are
paying on their current FHA loan. It is only for refinances, not for purchases.
There is no requirement for proof of income on this program and there are no requirements to have cash reserves. In some cases, no appraisal is required either.
The main requirement for the FHA Streamline program is that it must benefit the borrower. As with other FHA loans, this program is specifically for your primary residence and not designed for rental properties.
Not Sure What Type Of Loan You Should Get?
You can’t be expected to know all the details of the different mortgage programs, including what it takes to qualify for each one and which one will give you the best solution.
We are familiar with the different options that are available and can help guide you to find your best solution. In fact, we can take your scenario and run it on various pricing software programs to find the option that fits you best.
So if you aren’t sure what option to choose, don’t worry. We will help you find the right solution for your situation.