If you are a first time home buyer or a person who is buying a house for the conventional loans, it is important to note that there are many types of home loans. The most commonly used types of home loans include conventional loans and FHA loans. There has been much discussion about these two kinds of mortgages in the past few weeks. Although they both deal with similar concepts such as borrowing money to buy a house, there are some differences between the two as well as benefits that each offers. A conventional loan, in particular, is a kind of home loan that has been commonly used by most people.
The following are some of the benefits associated with conventional loans:
1) Conventional and FHA loans offer similar interest rates and options: Some borrowers may believe that they should only apply for an FHA mortgage when buying a house because it offers lower interest rates. However, this may not always be the case since many lenders will give you equal opportunity to choose between conventional and FHA mortgages when applying for a loan. In other words, whether you’re taking out an FHA or a conventional loan, there is no guarantee that the former will have lower terms than the latter.
2) Conventional loans are more lenient: What distinguishes conventional loans from other forms of home loan is the fact that they require lower down payments. This means that if you qualify for a 30-year conventional mortgage, you may not need as much as 20% down as compared to FHA loans; which, in turn, means that conventional mortgages offer more flexibility and options when it comes to borrowing money.
3) Conventional Positives – Flexibility: Another benefit associated with conventional mortgages is the fact that they come with flexible terms and conditions. In other words, if you decide to refinance or sell your house after 3 years of owning it through a 15 year conventional mortgage, you won’t be required to pay penalties as long as you’ve been regular with your monthly payments. In addition, these loans make it possible for homeowners to sell their properties early as compared to other kinds of mortgages. Because conventional mortgages enable borrowers to pay off more than what they owe on the house, homeowners can easily borrow money through this type of mortgage and sell their house before the loan is paid in full if they need extra cash.
The next time you decide to buy a house, be sure to consider all your options before taking out a home loan. Although first time home buyer loans are very useful for many homeowners, others may find that conventional mortgages offer more benefits than FHA loans do.
When you’re trying to save money, the last thing on your mind is whether or not a loan will be good for what’s in front of you. But if there were ever an occasion where understanding which kind would suit best could come into play- well let’s just say that now might be such as time!
A lot can change during these years we call adulthood; life events happen like graduation ceremonies and weddings which require cash injections from ol’age savings accounts (or ESAs).
