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In almost every case, a first-time homebuyer will need a mortgage to complete the purchase of their home. Depending on your personal finance situation, you may choose between a conventional loan, or a Federal Housing Administration loan. Each of these loans has its own pros and cons, and each type has its own requirements. What’s the difference between the two, and how do those differences affect your financial outlook heading into the future? In today’s blog, we help you move forward with the next step in the home-buying process.

What Is a Conventional Loan and Why Would You Choose It?

A conventional loan is one that is not issued by the government — that is to say, it’s a private home loan. Most conventional loans include a fixed interest rate throughout the life of the mortgage. This is typically a good option, because you don’t want your monthly home payment to be subject to market volatility. Conventional mortgages often cost less than guaranteed mortgages, but they also come with more requirements. You’ll need to make a bigger down payment, clear a more significant credit score hurdle, and have a lower income-to-debt ratio. If you can meet those requirements, conventional might be the way to go.

An FHA Home Loan Has Less Stringent Requirements

The other most common type of home loan is one that is issued by the FHA. To help first-time homebuyers, the FHA has mortgage plans with much lighter credit and down payment requirements. In fact, you can make an initial down payment as low as 3.5% of the total purchase price after you’ve secured an FHA mortgage. If you choose an FHA home loan, you will have to pay a mortgage insurance premium, which is rolled into the monthly cost of your mortgage.

You May Be Eligible for a Veterans Affairs Loan

If you are a service member, you may be eligible for a third type of loan. VA loans are not actually issued by the VA. They’re issued by private financial institutions, but they are guaranteed by the VA. That means that the VA can secure favorable loan terms for its applicants. This eliminates some of the hurdles that come with purchasing your first home. You may not even need to make a down payment as part of your VA mortgage arrangement. If you are a veteran or service person, check to see if you’re eligible for a VA loan.

Start Searching for Your Home with The Swanson Group

Securing a mortgage pre approval letter makes you a serious homebuyer. If you’re wanting to connect to trusted home loan officers to secure your mortgage, reach out to The Swanson Group. We have a network of trusted industry professionals, and we’d love to put you in touch. When you’re ready to start your home search, talk to Bill, Chris, and Faith at The Swanson Group in Omaha, NE by calling 402-679-6566.