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Conventional Loan Mortgage
When you apply for a home loan, you have the option of choosing between a government-backed mortgage, like an FHA loan, or a conventional mortgage. Rather than being insured by the federal government, conventional mortgages are insured by a private company.
Because they do not have government backing, conventional home loans are a higher risk, which means you can expect stricter income and credit requirements. If you qualify, conventional loans offer many advantages, and they are often more affordable.
There are many types of home loans, although fixed-rate mortgages remain the most popular option for homebuyers. Most fixed loans have a 15-year to 30-year term. Also known as conventional loans, fixed-rate mortgages have been around longer than any other loan option.
Each mortgage payment will be equal to your interest rate times the principal on your loan, plus a percentage of principal. At the beginning of your mortgage, most of your mortgage payments will go toward interest, while most payments will go toward principal toward the end.
The FHA loan program is one of the most popular mortgage programs in the United States. The Federal Housing Administration (FHA) does not lend money, but insures loans made through FHA-approved lenders, which reduces their risk if the borrower defaults. This allows lenders to provide loans to borrowers who would otherwise not qualify, including those with average credit or low to middle income.
Following a great deal of defaults and foreclosures, the FHA mortgage program was put in place in the 1930s to offer mortgage lenders insurance against their risk and make home loans more affordable and accessible.
VA loans through the U.S. Department of Veterans Affairs are available to qualified veterans and military members.
The VA does not make loans, but insures loans made available to veterans. The VA guarantees loans made by MIG to give veterans better rates and terms.
|Example Payments/Rates||Home in 37421||$350,000||Credit Score of 740|
|Est. Closing Costs/Prepaid||$9,162||$9,386||$9,000|
|Est. Total Cash to Close||$26,662||$21,636||$9,000|
|Monthly Principal Interest Payment||$1,759.62||$1,951.26||$1,974.31|