Published on December 18, 2013
Written by The Servion Group
When first looking into a home loan, borrowers often aren't sure what type of mortgage they need or want. When CU Companies works with borrowers, the first step is to educate them on all of their loan options. A lot of times we talk about the differences between the two most common loans: conventional and FHA.
Both conventional loans and FHA loans are offered to our financial institutions and their borrowers. There is no difference in how much the financial institution gets paid for a referral, whether the borrower chooses conventional or FHA. We put the borrower into the best product available for them. We don't want to steer them into a direction they shouldn't go.
The benefits of a conventional loan is the borrower doesn't have to pay mortgage insurance for the life of the loan like they would with an FHA loan. If the borrower can pay a down payment of 20 percent, they will not be required to have mortgage insurance on a conventional loan. If the borrower is unable to put that much money down, the mortgage insurance is lifted once the borrower gains home appreciation and pays down the mortgage to reach 80 percent loan-to-value.
Another benefit of a conventional loan at CU Companies is that the borrower has the option to have their down payment gifted to them. Most lenders do not allow all gift funds on a conventional loan. Borrowers choosing a conventional loan can also get an appraisal to have their mortgage insurance lifted if they see an appreciation in their home value.
FHA loans are more appealing to first-time home buyers because they are easier to qualify for based on assets, income, and credit. They also have a lower down payment and allow higher debt ratios and non-occupying co-mortgagors. FHA loans are, however, more expensive loans due to the mortgage insurance.
Between FHA and conventional loans, about 20 percent of loans done at CU Companies are FHA, with the remaining 80 percent being conventional. We are forecasting that FHA loans done at CU Companies will increase by 10 percent next year, due to first-time home buyers and boomerang buyers* who are looking for more flexibility in their loan.
With questions, please contact Jason Groth, Production Manager, at 651-787-9550 or email@example.com.
*Boomerang buyers refers to borrowers who have gone through a bankruptcy or a foreclosure and have to wait three years in order to purchase a home through the FHA program.