Qualification

As qualification for conventional mortgage loans becomes more challenging it is important to know the different between qualifying for a conventional mortgage and an FHA mortgage. FHA mortgages are generally easier to qualify for because FHA insured lenders are more accepting of borrowers with adverse credit, bankruptcies, or late mortgage payments. With an FHA mortgage a borrower with an excellent or poor credit score can still buy a home with a 3 % down payment and get a low fixed rate; something that a conventional loan definitely offer.

On the other hand conventional loan will allow a borrower to take a loan with out documenting income. Also known as a stated or no income check loan, with this type of qualification the borrower may not be subject to proving their income via tax returns, pay stubs or any other kind of proof of income. This is where conventional loans gain an advantage on FHA loans. With a "No Income Check" loan a person may be able to afford the loan they are taking but just may not be able to fully document his or her income. A person may opt for a no income check loan if they own a cash business, be self employed and claim many losses or just may not want to deal with the added paper work. Granted, these types of loans usually come with a higher interest rate and FHA mortgage loans do not offer this no income check option. In order to qualify for an FHA mortgage loan you must show the FHA approved lender that you can afford the loan via certain income documentation like tax returns, pay stubs etc.

How ever, many people are finding it hard to qualify for conventional loans now-a-days due to stricter lending guidelines enforced by conventional lenders. A person looking to qualify for a conventional mortgage loan today will in most cases need an above average credit history, and a larger down payment than FHA lenders require. FHA lenders will not turn down a loan because of a low credit score and will even allow up to 97% financing all the while issuing a fixed mortgage interest rate in the 5's and 6's.

Overall, we believe that an FHA mortgage loan has easier, more flexible, less restrictive guidelines which make borrowing mortgage money in today's lending market a bit more realistic.

Maximum Loan Limits

Conventional loans can boast at least one advantage over FHA mortgage loans. As of right now, conventional lenders have the ability to loan more money per house than an FHA lender. This is due to the fact that FHA lenders have set certain limits on the maximum loan limits they will issue.

The good news is a bill was recently signed raising the FHA loan limits. Speculators believe that by mid summer 2008 you will be able to take a loan on a single family for $417,000 or higher. You should fill out our secure FHA refinance form to have a lender tell you home much of a mortgage loan you may qualify with FHA.

In conclusion, if you are looking to buy a million dollar home you will most likely be using a conventional mortgage lender. You can click here to apply for a conventional loan where they can match you up with a great conventional lender who will answer all of your questions.

When Purchasing a Home

Both conventional and FHA lenders can help you finance the purchase of a home, be it your 1st home or not. Here is how the 2 match up...

Conventional loans will allow for 100% financing or no money down loans where FHA lenders will require 3% down but good luck getting this type of financing out of a conventional lender anymore. Many conventional lenders are reluctant to write a mortgage loan for 100% of the value of the home due to a nationwide declining real estate market and the number of foreclosures in recent months. These days it is more common for a conventional lender to require a 5% minimum down payment with stricter qualification guidelines than an FHA loan including a 700+ FICO score and FULL income and assets DOCUMENTATION. If you are attempting to obtain a no income check loan with a conventional lender you best be packing a stellar credit score and liquid assets to get a decent rate. A buyer with a credit score in the mid to low 600's can expect to be required to document income and come into the deal with 15% of his or her own money as a down payment.

FHA loans are usually easier and more realistic now-a days when buying a home. While they do not offer a no money down loan, FHA mortgage loans only require a small 3% down payment that can get a gift from a family member, employer or charitable organization. Unlike conventional lenders FHA loans offer low fixed rate financing that is not based on your credit score. With FHA loans your credit score will HAVE NO AFFECT on your interest rate, required down payment or approval decision. With FHA's 203k Rehab loan, if you qualify you can get extra money to fix up the home you are purchasing (if repairs are needed) in the same mortgage you are taking to buy the home! Overall we recommend using an FHA insured mortgage loan to buy your home. You can click here to apply for an FHA purchase loan, or here to apply for a 203k Rehab Purchase loan if you believe the home you are buying may need some repairs.