Are there any benefits of buying a home as opposed to renting one? The long term benefits to those who buy homes are innumerable. Personal wealth, all over the world, is most often created through home ownership and it starts with home loans. The ability to pass something down to others, the sense of pride, the ability to eliminate the largest expense (paying it off), and community development are some of the benefits.
Buying a home is cheaper than renting in most areas of the country, but few people know this truth. Majority of the population look at their credit scores and convince themselves that they are better off renting than buying. The reason here mostly, is because not many people are aware of the options available in the market for would-be home owners. Home mortgages are your best option of owning homes in this country especially if you are unable to settle the payment upfront.
There are several options for home loans. We will compare two options here both of which have pros and cons, and are being used for the majority of the loans today, they are:
- FHA Home Loans
- Conventional Home Loan
FHA Home Loans
Federal Housing Administration is a federal loan program that allows for relaxed credit guidelines. It allows home buyers the chance to purchase a home by insuring approval of mortgages by FHA approved lenders and financial institutions. It is also famously known as a bad credit score as it allows the lowest credit score when approving a borrower. Since they are backed by the federal government, there are restrictions in place that dictates that not all property types available for purchase are eligible.
FHA loans have flexible lending guidelines that mainly benefit:
- Borrowers with bad credit scores.
- Home buyers with small down payments.
- People whose house payment will be a huge chunk of their take-home pay.
Advantages of FHA Home Loans
- A minimum of 3.5% of the total cost of the home is required as down payment.
- Lower credit score requirement, a credit score of 580 or even lower is good enough.
- There is no chance of prepayment penalty, you pay it off fast.
- Can be cheaper closing costs, and easier to obtain or qualify.
- Amazing interests rates.
Disadvantages of FHA Home Loans
Since FHA loans are insured by the federal government, it has restrictions in place, not all purchases are eligible.
Conventional mortgages refer to a loan that is not insured by the federal government, may have a fixed or flexible interest rate, and has no limit on the amount of loan a borrower can qualify. However, it requires a good or even better credit score.
Conventional loans are good for home buyers with very good or better credit score. They are not insured by the federal government thus have no restrictions, all purchases are eligible. They are convenient too, a home buyer does not have to wait so long to have it processed as do FHA loans.
Advantages of Conventional Loans
- There are numerous loan program options.
- No mortgage insurance is needed as 20% down payment may be required.
- All property types at a borrower’s disposal are eligible for a conventional loan.
- No limit on loan amount exists.
- A borrower can have more than one conventional loan at a time.
Disadvantages of Conventional Loan
A borrower needs to have an excellent credit score to qualify for the best interest rates.
Home ownership has been made easier by the numerous loan options available in the market today. Both options that we have shared here work very well. Let nothing deter you from owning your own home and living the life you deserve, not only for yourself, but for your children’s children. So, if you have a lower credit score, prefer a lower down payment plan, and would love to have good interest rates, then FHA is your best option to owning a home.
However, if your credit score is excellent and you can afford repaying a conventional loan, then go for it. Since you have no restrictions on the property types that you can purchase, go ahead, own a home in a location of your choice.
Ready to find a lender? Click the link below and within minutes you’ll be matched with a qualified lender eager to help you with your FHA or conventional loan. Your lender can also answer any questions you may have. Click the link below to get started. It’s quick and easy and only takes a few minutes to get started. Start your lender search right here, right now. Don’t wait. Remember mortgage rates change almost daily. Get your rate quote locked in today before the rates change.
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