What Are the Differences Between an FHA Home Loan and a Conventional Loan

When you are looking at the different loans available to purchase or refinance, it can be confusing. Over the past year there have been many changes in the underwriting guidelines for all mortgages. FHA has become a very popular choice for many home buyers. Let’s take a look at the basic differences between an FHA loan and a conventional loan.

FHA stands for Federal Housing Administration. FHA insures loans that are made by approved FHA lenders, they do not lend directly to borrowers. FHA provides lenders with insurance in case a borrower defaults on their loan.

Fannie Mae and Freddie Mac are government sponsored enterprises (GSE). Their mission is to provide stability and liquidity to the U.S housing and mortgage markets. These GSE’s also do not lend directly to borrowers, but they help to ensure that the banks and mortgage companies have funds to lend at affordable rates. These types of loans are typically conventional loans.

The FHA underwriting guidelines are generally more liberal than on a conventional loan. The minimum down payment required by FHA is 3.5%. All of the down payment can be a gift from a family member. The seller is allowed to pay up to 6% of the purchase price towards the buyers closing costs. To be eligible for the 6% from the seller, it must be negotiated in the purchase contract. The minimum credit score that most lenders will allow on an FHA loan is 580.

At this time, the minimum down payment on a conventional loan is 5% – 10%. Due to the lack of private mortgage insurance available, most lenders are requiring that the borrower have a minimum credit score of 720 for a loan to value of 90% – 95%. The seller can pay up to 3% of the purchase price toward the buyers closing costs. However, they can only pay the non-recurring costs. They are not allowed to pay the recurring costs such as taxes, insurance or pre-paid interest. On an FHA loan, they can pay both recurring and non-recurring costs.

One of the other benefits of an FHA loan is that they will allow a non-occupant co-borrower to co-sign on the loan. The income of both the borrower and co-borrower will be combined and used for qualifying. On a conventional loan, the owner occupant must qualify at 35%/43% ratios unless higher ratios are approved by the Automated Underwriting System.

Another difference between conventional and FHA loans is regarding private mortgage insurance. FHA mortgage insurance is required on all 30 year FHA home loans regardless of the loan to value. FHA has a monthly mortgage insurance premium and an upfront mortgage insurance premium. Even though it is called an upfront mortgage insurance premium, it is usually financed into the new loan. On average, the upfront premium is 1.75% of the loan amount. Once you have paid on the monthly mortgage insurance premium for a minimum of 5 years and the loan to value is 78% or below, you can get rid of the monthly mortgage insurance. Speak to your current lender for requirements to remove the PMI.

Conventional home loans also require private mortgage insurance; however, they only have a monthly mortgage insurance premium. They do not require the upfront MIP. Also, conventional loans usually only require mortgage insurance on loan to values that are over 80%. You can have the mortgage insurance removed from your conventional loan once you have paid for 5 years and the loan to value is 80% or below. Check with your current lender for specific documentation needed to have your PMI insurance removed.

Auto Equity Loans Can Finance That Dream Vacation

Are you one of the millions of Americans with an imperfect credit background? And are you really feeling the sting this increasingly gloomy economy? Well, not everybody is perfect. And in this economy it can be the difference between staying at home and going on your dream vacation. But there are ways to get around these obstacles to obtain the vacation you’ve always dreamed about.

Auto equity loans allow many individuals, many of whom who have shaky financial histories, access to the credit they need. Not only do these agreements require hardly any paper work, but they can be completed over the internet in practically no time. Now, that dream of a faraway vacation, maybe even to Bora Bora is not only practical, but even obtainable with the completion of a few forms.

Auto equity loans are not only easier to get than payday loans, they also usually offer more money. This is because these types of agreements are what is called secured loans, meaning that not only do they offer less risk for the lender, but they allow the lender to offer a greater payout upfront.

And since these are less risky transactions for the lender, they allow you, the borrower, money that you might not have had access to otherwise. So in many aspects, these benefit both parties. They could just be your solution.

Auto equity loans are simple and easy. In essence, they really only require two things. One, you need to own a vehicle; the paperwork has to be under your name. And two, that vehicle must be paid off. So thus for all practical purposes, you must own the vehicle you are putting up for collateral, which is actually one thing. From there you go online, fill out a little paperwork, and in no time, you have your loan. And now, you are one step closer to that vacation.

Auto equity loans are more appealing to lenders than say, payday loans, because the borrower, in this case, you, puts their vehicle up for collateral. This is what is called a secured loan, because something is offered as security in case the borrower faults on the agreement.

In instances where the money is not paid back, the lender reclaims the vehicle in lieu of payment. It’s a safer agreement with less risk for the lender because they know they can get something back. In most cases, the borrower can receive up to 50 percent of the car’s wholesale value. This is because often the price of the car lowers from the time of the original transaction to the time when the amount is fully paid back. It gives the lender piece of mind that all of the money owed will be recovered.

Usually the lender will ask that the borrower agree to make them aware of any addresses changes during the tenure of the loan and that they agree not to file for bankruptcy. This helps not only ensure the debt will be paid back but that they can lend again in the future. So maybe your credit problems won’t affect your vacation after all.

Before agreeing to a financial agreement of this type, be sure you fully understand the terms. Also, it is of great benefit to you to do some legwork before choosing a company. A little extra time at the computer comparing terms and rates from various companies can really pay off in the end. Check out and see if auto equity loans are right for you.

Cash Loans – Track Your Loans and Get in the Black ASAP

At the start you were good checking out what’s going on with your cash loans and credit card debts only to lose interest in the long run. Tracking your loans helps you manage your debts and reinstates on you on the black fast.

The Debt Tracking Game

Like the stock market, your credit card debts and other loans shift or fluctuate. These are all influenced by yoyo interest rates. If you are the owner of varied debts that include cash loans, shouldn’t you be tracking your debts? Doing so, you would be alerted to good loans and loans that hurt the finances and tracking your loans keeps you fully aware of the numbers game.

Loans are not always bad. These can help you when you need the money most. Cash loans for example are faster to obtain, helping you meet urgent emergency needs that require cash. On the flip side, fast loans have to be watched carefully and paid immediately on due date. Borrowers who keep tabs of their loans are on the right track in the numbers game.

To track your debts, use a personal budget sheet. List all the regular household expenses and your loans. Figure out which debt has to be paid immediately to get you on the black in a few years or months time. Looking at your personal budget sheet, you can cross out expenses you can live without until you have paid off your debts but please, during this debt-ridden time, chuck those credit cards or keep them under lock and key or you will never get out of debt.

Tracking your debts is different from having those numbers furiously racing around in your mind without a sensible direction. Compute how much you are going to live on when due date comes around, that is after a two-week period for cash loans. Also figure out with a calculator how much interest your loan accrues if you fail to pay on the agreed period. That additional $15 or $25 can be a big issue and more if every dollar of your paycheck goes to your living expenses.

Why Track Your Debts?

When you know the real score about the interests that goes with cash loans, you are motivated to pay the loan when due date rolls in. The huge deduction from your paycheck hurts but this is a hundred times better than rolling over that loan. Those $25 fees can add up to a thousand dollars and much more if you keep on thinking that $25 is a little amount.

Track cash loans and create a scenario of what ifs. These loans are better paid on time to make it work for you. Here’s why. There is a $20 charge added every $100 for a $500 loan. To the man on the street, this is just a price to pay for a fast loan not knowing that the fee and the interest rate can add up fast.