We know that purchasing a home is a daunting task for anyone, but especially first-time homebuyers. There are many different types of loans available and it’s important to understand each major type to ensure you’re able to make an informed decision.
Conventional loans
Conventional loans are any loan that isn’t insured by the government. This means if the borrower defaults on their loan, the lender is at risk of losing money. Conventional loans are generally more difficult to qualify for than government-insured loans. People that usually qualify for a conventional mortgage possess three qualities: good credit, steady income and can afford the down payment.
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Contrary to popular belief, it is possible to qualify for a conventional loan without putting 20% down. However, lenders generally require those borrowers to purchase Private Mortgage Insurance to protect themselves in case the borrower defaults.
These mortgages come in a variety of sizes and terms, including fixed- and adjustable-rate loans, and generally conform to the industry standards set by Fannie Mae and Freddie Mac. Conventional loans are also known for having a speedier approval process, making them ideal for borrowers that need a loan quickly.
Government-insured loans
Government-insured loans, or non-conventional loans, are exactly what they sound like: loans insured by the government. Popular government-insured mortgages are FHA and VA loans.
They are typically easier to qualify for, with lower down payment and credit score requirements, making them a perfect solution for those that can’t qualify for a conventional loan. In addition, they generally have lower closing costs than conventional loans. All of these factors make government-insured loans an ideal choice for first-time homebuyers.
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While they do offer borrowers more flexibility, most government-insured loans require borrowers to purchase mortgage insurance with the exception of VA loans.
Whether a conventional or government-insured loan is right for you all comes down to your unique financial situation. If you are looking to buy a home, please don’t hesitate to contact us at (402) 991-5153. We’d be more than happy to help you determine what would be in your best interest. Or click the button below to begin the process today!
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