fbpx
Average Rates: 3.6% - 30yr|3.25% - 15yr
for a free quote!

Homestead Financial Mortgage

Let Homestead Financial Mortgage provide you with a stress-free home mortgage or refinance experience! Ask us anything at anytime because it's always #zerotofindout.

Should I get an FHA or Conventional Mortgage?

In today’s market, there are 4 types of mortgages available, Conventional, FHA, VA and USDA. Of those 4, Conventional and FHA are the most common so we’ll cover those, (VA mortgages are only available to US Veterans, and USDA mortgages only apply to certain homes in USDA sanctioned zip codes).

In general, conventional mortgages are harder to qualify for, require a larger down payment but have lower rates, FHA mortgages are easier to get from a credit perspective and require a lower down payment, but you pay more due to the mortgage insurance. The general standards as defined by the 3 C’s of mortgage qualifications, Credit, Capacity(Income), and Collateral (see related on the 3 C’s: How Do I Qualify for a Mortgage) are:

Conventional Mortgages

Credit:

In general, must be above average (700) if your Loan to Value is over 80% with no major derogatory credit in the last 2 years. Bankruptcies must be over 4 years old.

Capacity(Income):

Must be stable for 2 years, and no excessive obligations on credit.

Collateral:

If your score is below 700, you should be expecting to have 20% equity or putting 20% down on your purchase, If do not have 20% equity, your score pretty much needs to be above 700 and expect to pay Mortgage Insurance.

FHA Mortgages

Credit:

In general, must be above 640 and no major derogatory credit in the last 1 year. Bankruptcies must be over 2 years old.

Capacity:

Must be stable for 2 years, total obligations can be up to 50% of gross income.

Collateral:

Can purchase a home with as little as 3.5% down.

So, to conclude, Conventional mortgages are harder to qualify for, but the rates may be worth it. FHA rates may be higher due to the mortgage insurance, but help you get a home with less, down and more forgiving guidelines.