Determining which mortgage program is right for you is an important step in the home purchase process or deciding if its time to refinance.
Several of the most popular programs today are FHA & Conventional loans. Conventional loans meet the high standards set by the government sponsored agencies, Fannie-Mae & Freddie Mac that in turn buy the mortgage loans from the originating lender.
FHA loans are insured against default by the Federal Housing Administration and are offered by lenders directly.
Both conventional loans and FHA loans are offered in fixed rate as well as adjustable rate options. Each loan type has pluses and minuses depending on your situation and what you may qualify for.
Conventional loans require a minimum down payment of 5% compared to 3.5% down for an FHA loan. FHA loans have more lenient qualifying standards then Conventional loans and generally allow lower credit scores and higher debt to income ratios requirements.
Probably the biggest drawback to the FHA program is the higher annual mortgage insurance premiums and upfront mortgage insurance premiums associated with these loans. Conventional loans with less than 20% down will usually have private mortgage insurance premiums at a lower cost then the FHA program.
To learn more about which program is best suited to your situation please call a Susquehanna Lending Group advisor today.
Fixed Rate Mortgages
When you choose the fixed rate option the rate remains the same for the life of the loan. Fixed rate loans are generally offered in terms from 8 to 30 years.
The shorter the term of your mortgage the lower your rate will be. So that if you qualify for a 15 year term your rate will be lower but your monthly payment will be higher than a 30 year term because you are paying your loan off in half the time.
It is wise to consult with your Susquehanna Lending Group advisor to determine a term and payment that will fit your budget and financial goals. It is important to remember that the longer the term the more interest you will be paying over time. The fixed rate option gives you the advantage of knowing what your payment will be for the life of the loan, which will help with household budgeting.