FHA loan in San Antonio

The differences between the Conventional loans and FHA loan in San Antonio

Introduction

San Antonio FHA loans have many differences with the conventional home loans in San Antonio, which are essential for a home buyer to study and understand before choosing which would assist them better in their home buying process. This article discusses some of these differences to make it easier for the home purchase to compare the two types of mortgages:

Down payment requirements

FHA loans in San Antonio have a low down payment of 3.5% on the home price, which is attractive to many home buyers. With conventional loans, the down payment was initially 20%, but it is now possible to get a loan with a low down payment of 3% through Freddie Mac and Fannie Mae making it also attractive to many home buyers.

Private mortgage insurance

For a conventional loan, any buyer who puts less than 20% on down payment pays some mortgage insurance that acts as security for the investment in case the buyer defaults. FHA home loans have both upfront premium and a monthly premium which is usually rolled into the mortgage or paid at the closing. The instalment per month is included as part of the mortgage payment, and for the conventional loan, the PMI depends on the value of the mortgage and credit score.

Loan limits

The limits of FHA loan depend on the place one intends to purchase their homes and their prices in that area. Conventional loans have set limits regardless of the place of the house. A home buyer can buy a primary residence, vacation or rental property, but FHA loans only fund primary homes and assume that the homeowner will reside in the home throughout. 

Qualifying for the loan

The two types of mortgages have different qualification requirements for the mortgage lender in San Antonio to approve the buyer. For FHA, one needs a down payment of 3.5% and a FICO score of 580 though it’s possible to get a loan with lower credit. Conventional loans require a FICO score of 620 or higher. The two mortgage loans need one to have enough income and the DTI ratio of 43% for a conventional loan and slightly higher for FHA mortgages. For a home buyer to qualify for either traditional or FHA loans, it is necessary to work on their credit score and pay off most of their debts including the credit cards to have a better standing with the mortgage lenders in San Antonio. One can seek the advice of mortgage brokers who may advise on the best lenders.

Conclusion

For a buyer with low credit score, FHA mortgage loan in San Antonio may be a better option though it will limit the type of home. Conventional loan in San Antonio, on the other hand, maybe suitable for a home buyer wishing to purchase and investment property and who may also be able to raise a higher down payment.