FHA Loans are not for First-Time Homebuyers Only
Buying a home or refinancing a current mortgage is not as cut and dry as you think. You have many options. Government loans are not just for first-time homebuyers anymore. They are good for many borrowers. Conventional home loans have their own benefits too. How do you decide which one is right for you? Let’s take a look.
Why Conventional Loans Take the Cake
If you asked a handful of people which loan is better, they would say conventional. This is just the common thinking in our society. Conventional means lower interest rates and better terms. It might, but not always be the case, though. It also means PMI with less than 20% down and stricter guidelines. Many people don’t realize that part of it.
They just see advertisements for low conventional rates. They then assume this type of loan is better. What is best is what works for you. If you don’t have the financial history to qualify for a conventional loan, you are not a “bad borrower.” You would just do better with one of the government loans available.
What are Government Loans?
- FHA – This program is available to any borrower that qualifies. The credit score, debt ratio, and down payment requirements are more forgiving than conventional programs.
- VA – Only qualifying veterans can use this program. You must serve at least 90 consecutive days during the war or 181 days during peacetime to be eligible. The requirements for this program are fairly simple.
- USDA – This program is for low-income families purchasing or refinancing a rural home.
Each program is backed by the appropriate government program. This means the agency guarantees the loan for the bank. If a borrower defaults, the appropriate agency pays the bank back.
Another common fallacy is that FHA loans are only for first-time homebuyers. This used to be the case. It’s not today, though. In fact, many people use it because of the low credit requirements. Continue Reading
