Tehama Country Real Estate

Tehama Country Real Estate – 3 What's the Difference Between Conventional Loans and FHA? you will ever purchase, so a mortgage loan is most likely going to be applied. B Down payments will vary according to credit score and the amount of the loan balance you wish to stretch over 15 to 40 years. The borrower has two options when selecting a loan product. The most popular type of loan is a private sector, or conventional loan, taken out from a bank or mortgage company. The sec- ond option is to use the federal govern- ment's FHA loan, which functions like a private loan, yet offers a few unique features. Conventional Loans To take out a con- ventional loan, the borrower must start with a credit appli- cation. The higher the credit score, the better the loan product will serve the borrower. Persons with above average credit may apply for a conventional loan with a lower interest rate, which translates into lower monthly payments. This type of loan may be set for a 15- to 40-year property payoff with options to increase the monthly payment to pay off the loan balance early. The conventional loan may be purchased by using a loan broker who will shop for the best price, terms and conditions for the borrower. The loan broker has access to all loan products on the market and takes the time to explain the paperwork to each client indi- vidually. The broker or broker's agent will shop a mortgage loan for an initial real estate purchase or to re-finance a property, collecting bids from the top lenders in the industry. All estimates should be delivered to the client to examine before settling on the right loan product for each unique purchase situation. FHA Loans The federal government has developed a system to help borrowers make a real estate purchase through Alex Mason is a former real estate agent and mortgage bro- ker living in Los Angeles. uying a home may be the biggest ticket item Real Estate Spotlight By Alex Mason the FHA lending program. An FHA loan is not a lender's check for the money to purchase the home, but rather, the federal government is guaranteeing the loan to the private sector. This opens the door to more liberal lending policies from banks to write up a loan to persons who might otherwise be consid- ered a high risk. First-time home owners are an excellent candidate to apply for an FHA lending pro- gram, along with people with limit- ed income that might otherwise be turned away. The FHA loan may be applied to a single family home or condo and has a borrowing cap set firmly in place. The FHA loan may be set at a fixed rate for 15 to 30 years with the option to buy down points just like a conventional loan. In addition, the borrower is free to ask for an adjustable rate mortgage, but this practice can be risky should the interest rates jump in the future. The interest rate on an FHA loan will be affected by the borrower's credit, just like a conventional loan. However, the down payment will usually fall at about 1.5 percent of the property value to make it eas- ier to step into a property agreement. Finally, the FHA loan is assumable, making this an attractive feature when selling the property. Simply put, the new owner may take over the FHA loan and payments if he or she can qualify with the credit. The FHA loan plan is ideal for persons with chal- lenged credit, first-time buyers and those who are seeking modestly priced homes. The FHA program means you have everything to gain and nothing to lose by using the government system. Ask your local loan professional if they handle the FHA paperwork, and you are on your way to owning your own home.

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