Tag - conventional mortgage

Conventional vs. FHA vs. VA Loans and Mortgages

Looking for and obtaining a mortgage loan can be very challenging. Depending upon your specific needs, the process may be lengthy, confusing and ultimately disappointing. It’s imperative that you understand the differences between conventional, VA and FHA loans so you get the perfect one for you. All three loan types are issued by banks and other approved lenders.

When you apply for a home loan, you can apply for a government-backed loan such as a VA or FHA loan. Conventional loans are not insured or guaranteed by the federal government. This means that there are no guarantees for the lender if you do not repay the loan. Because of this, if you make less than a 20% down payment, you must pay for private mortgage insurance (PMI) with a conventional loan. In this way, if
you default on the loan, the mortgage insurance company ensures that the lender will be paid. Conventional loans are either conforming or non-conforming. Conventional conforming loans adhere to the rules set by Fannie Mae and Freddie Mac and are available to everyone. They are difficult to apply for because there is no government insurance so income and credit requirements are much stricter than for VA and FHA loans. Nonconforming loans also include jumbo loans, portfolio loans, and subprime loans.

An FHA loan is insured by the Federal Housing Administration (FHA). Because the loan is insured, you may qualify for a low down payment such as 3.5% of the purchase price. FHA loans have a maximum loan limit that depends on the average cost of housing in your area. As part of an FHA loan, you will pay a mortgage insurance premium (MIP) as part of the loan so that the FHA has the ability to pay the lender in the case of a loan default. Borrowers with a FICO score of less than 500 could be eligible for an FHA loan.

A VA loan is guaranteed by the Veteran’s Administration (VA). This loan is reserved for certain borrowers through VA-approved lenders so that lenders are guaranteed repayment in the case of loan default. To obtain a VA loan, you must be a current member of the US armed forces, a veteran, a reservist or national guard member, or be an eligible surviving spouse. VA mortgages are guaranteed with no money down and without the private mortgage insurance requirement. However, there is a funding fee which is a one-time charge between 1.25% and 3.3% of the loan amount.

At Superior Mortgage Company, Inc., we specialize in dozens of residential and commercial loans and provide the best products and services available. Our team can help you decide which loan fits your circumstances and answer any and all questions you may have about the process of obtaining a loan. Whether you want to purchase, refinance or take advantage of a home equity loan, we can help. Please contact us at 845-883-8200.