Congratulations! You have just taken a step into a new world with the decision to purchase a home. Before you can get a mortgage, you must be able to qualify for one. Lenders take into consideration many different factors when evaluating applicants like you. Up Next: What Kind Of Mortgage Is Right For You? To […]
Government-Backed vs. Conventional Home Loans in KC
During the loan application process, you may hear your loan officer mention the benefits of conventional or government-backed home loans in KC. Here is a basic rundown of the benefits and costs of each home loan.
Government-Backed Home Loans
Government-backed home loans in KC are at least partially—if not entirely—insured by the United States government, including:
Many government-backed home loans in KC offer lower down payments than conventional home loans as well as competitive mortgage rates. If your government-backed loan is a federally-related mortgage, there are more tools to help you plan finances, such as an HUD-1 statement. Lastly, some government institutions are more likely to approve applications for people with imperfect credit than an independent lender.
However, qualification for these home loans can be difficult. In addition, even those who do qualify for government-backed home loans in KC add even more paperwork to the application process. Other drawbacks, such as FHA loan prepayment penalties, can make government-backed loans less appealing.
Conventional Home Loans
Conventional home loans are only insured by a lending party and not by the government. Therefore, the lending party risks losing money if you happen to default on your mortgage. Increased risk can lead to a higher mortgage rate or down payment than you would receive with a government-backed loan.
On the other hand, there are fewer requirements to get a conventional home loan in KC than a government-backed loan. There is more flexibility in the type of loan you can get, including:
- Fixed or adjustable mortgage rates
- Conforming or non-conforming loans
In addition, conventional home loans in KC offer better refinancing options than many government-backed loans, such as FHA loans. You can also get conventional loans from a wide variety of providers, which gives you more options while shopping for the right home loan in KC.