When it comes to determining which form of loan is ideally suited to their financial needs and aspirations, prospective homeowners have a plethora of options to consider. And it’s easy to get lost in a sea of mortgage jargon, never really knowing what all of the different words mean. click for more info
The following is an effort to distinguish between two form s of mortgage loans that can be used to buy or refinance a new home: traditional loans and government-backed loans.
Loans that are traditional
Conventional loans are those that are made entirely in the private sector and therefore do not have any government backing. Since these mortgage loans are not backed by the government, they usually demand a higher down payment and credit score than government-backed loans.
For traditional loans, the percentage of the down payment varies, but it is usually about 10%. Now, if you’re getting a home loan for a $500,000 building, you’ll have to put down $50,000.
The majority of people actually do not have too much cash on hand to spend. However, this is not the case for all. If you’re well-off, have good credit, and can afford it, there are compelling reasons to consider a traditional loan. You won’t have to pay for private mortgage insurance, and you’ll probably get one of the best mortgage rates around.
Loans Guaranteed by the Government
Government-backed loans, on the other hand, are guaranteed by a government institution. Three government departments insure these loans: the Federal Housing Agency, the Department of Veterans Affairs, and the Department of Housing and Urban Development.