FHA Loan or VA Loan by sethtj1

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									FHA Loan or VA Loan?
Whether you’re getting your first home, or buying for the third or fourth time, understanding loans,
mortgages or the financial elements of purchasing a home can be complicated. FHA loans and VA loans
are typically easier to obtain for first-time buyers and have more lenient and versatile options.

So, what do you need to know about FHA and VA loans? What are the pros and cons of each, and how
do you know which one is better? Well, like I said before, loans are complicated creatures, but let me
simplify each of these for you so that you can make an informed decision.

FHA Loans
FHA loans are loans that are backed or insured by the Federal Housing Agency. The loans themselves are
not given by the FHA, they are simply loans provided through approved lenders which the FHA promises
to cover if the loan defaults.

                                         Loans from an FHA approved lender allow borrowers to obtain
                                         down payments from other sources, which is atypical with
                                         conventional loans, and the interest rates tend to be lower.
                                         These loans are designed to enable families and individuals
                                         with weak credit and favor those with long time employment
                                         and job security. With an FHA loan, closing costs may also be
                                         rolled into the amount of the loan, provided the borrower is
                                         approved for the sum.

On the down side, FHA loans have higher mortgage insurance, and there are loan limits on the amount
that can be applied for. Homes with an FHA loan must be owner-occupied, and they can sometimes take
longer to process than standard loans, making you a less appealing candidate if multiple offers for the
home are on the table.

VA Loans
While VA loans are available expressly for military personnel and their families, if you qualify to apply,
there are several reasons you should seriously consider it. First, VA loans allow you to finance 100% of
the home, meaning that there is no down payment for the home you are purchasing, freeing up any out
of pocket money to spend on purchases for your move.
Additionally, VA loans do not require mortgage insurance and the
financial qualifications are quite relaxed when compared to other
types of home loans. On top of everything else, VA loans are
typically accompanied by some of the lowest interest rates
available on the market.

While the disadvantages of a VA home loan are minimal, there are
a few that exist. VA loans do have a cap on the amount of money
that may be borrowed, making it difficult to qualify to purchase more expensive homes. Additionally,
any fees associated with the purchase like closing costs, the cost of necessary repairs (as determined by
a VA approved inspector), and funding fees (though these may be rolled into the bulk of the loan and
are not due up front.)

Whether you qualify for a VA or FHA loan, it is important to take a serious look at your current and
projected finances, consult with trusted professionals who can give you good advice, and then make an
educated decision based on what you need.

Photo Credit: alexkalina , foxumon

								
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