Question

1. You are to respond to the following questions (BASED ON MARYLAND STATE REAL ESTATE RULES)
   • What are the advantages and disadvantages of purchasing a home with a (a) FHA-Insured loan
   • (b) a VA-guaranteed loan
   • (c) a Conventional loan

Answer 1

(a) FHA-Insured loan

The FHA or Federal Housing Administration mortgage insurance backed mortgage loan are the federal assistance that the people of the US of the lower-income group gets when they purchase a home which they otherwise won’t be able to afford.

• This loan gears the real estate investment making them afford the property that they couldn’t afford otherwise.
• This requires a down payment of 3.5% with Mortgage Insurance premium.

(b) VA-guaranteed loan

The US Department of Veteran Welfare or the VAQ loans established by them is meant for the Veteran Administration who is liable to give such mortgage loans.

• The VA sets the standards for the loans and dictates the terms for its application to interest payments for a portion of the loan
• But it does not offer the finance which is used by the banks and mortgage companies.
• A 1-time funding fee ranging from 1 to 3% is needed for such a loan.

(c) Conventional loan

The conversion is a mortgage loan that is not insured or guaranteed by the government.

• This loan is backed by the private financing and lenders, the insurance, in this case, is paid by the borrowers.
• This is the most common of all loans in the US which are conventional as they are not government-backed.
• Additional mortgage insurance has to be paid in such a case where 20% down of mortgage insurance is to be paid.