What type of loan should I get? Are you considering what type of mortgage loan to get for your house? In this interview, James from Envoy Mortgage explains the difference between a traditional loan and an FHA loan. Find out which is right for you!


Announcer 0:00:00.0 Welcome to the We Buy Houses podcast with our host Brian Spitz, President of Big State Home Buyers, leading the seamless approach to real estate investing in Houston since 2005. Brian’s specialty in this large wholesale operation is facilitating real estate solutions for people wanting to sell quickly. Each week we discuss the ins and outs of wholesale real estate investing and related topics by professionals who matter. And now here is Brian. Brian Spitz Hello, I’m Brian Spitz, President of Big State Home Buyers, and today we’re visiting with James Beaver from Envoy Mortgage. We’re going to talk a little bit about the difference between conventional financing—traditional financing—and FHA financing. This is when you go to borrow money to buy a new home. James is an expert at mortgage lending and offers great services at Envoy Mortgage. So tell us about these two types of loans. What type of loan should I get?

Conventional Loans vs. FHA Loans

 James Beaver Thanks a lot, Brian. Appreciate you having me. So basically, a majority of the mortgages that are made in the United States today are backed by Fannie Mae and Freddie Mac. These are what we label as conventional or conforming mortgages. And then there’s another chunk of mortgages that are FHA loans. It’s a government-backed loan program.  Brian Spitz Another one. James Beaver Yeah, government’s kind of in everything now at this point. But basically, really, they’re both great options. It just kind of depends on the situation, the home buyer, and what their needs and goals are. A conventional loan, one that’s backed by Fannie Mae or Freddie Mac, will tend to give you a little bit lower pricing as it relates to mortgage insurance and things of that nature. If you’re putting less than twenty percent down— Brian Spitz That’s kind of the marker, though, isn’t it, the down payment amount? James Beaver Yeah, the down payment amount is really one of the first things that we look at. FHA is going to give you a little bit more flexibility if maybe the credit is just slightly off where you’d like it to be. Maybe the down payment needs are such that the home buyer doesn’t want to put as much down. It gives you more flexibility in some respects. Also, the conventional loan is going to offer interest rates that are more credit score sensitive. If an FHA buyer has slightly less than A+ credit, they may actually get a better interest rate with an FHA loan, but they may be paying more in terms of mortgage insurance over the life of the loan. There’s really not a right or a wrong answer. It’s kind of a question of which one is the right fit for the home buyer.

Maximum You Can Borrow

Brian Spitz 0:02:47.9 There’s different amounts—the max that you can borrow—on each of them. So FHA has a maximum of—? James Beaver Right now, in our area, it’s $295,550. Brian Spitz That’s the maximum you can borrow on an FHA loan. James Beaver Correct. Brian Spitz And then the maximum for conventional loans is $417? James Beaver It’s $417,000, Brian, yeah. Brian Spitz And then you get out of that, you’re into jumbo loans. James Beaver Correct. Yeah.

What is a Jumbo Loan?

Brian Spitz What’s a jumbo loan? James Beaver A jumbo is a loan that is greater than $417,000. Typically jumbo loans are investor backed, and they don’t quite fit into the same box as that conventional—that Fannie Mae or Freddie Mac mortgage. And that’s in our area. Those are also tiered in different areas.

 Minimum Percentage for Loans

Brian Spitz Right. And so an FHA you can have as little as three percent down? James Beaver Three-and-a-half percent. Brian Spitz And then is there a minimum with conventional lending? James Beaver It’s five percent down right now. Brian Spitz But you have to have good credit for that. James Beaver Good credit, yeah. The less you put down on a conventional loan, the more important your credit score is. Yeah. Brian Spitz Okay. So if somebody wants to find out which one of these is best for them, how can they reach you? James Beaver Best to just give me a call at (713) 328-1138, or you can visit our website. That’s www.envoymortgage.com. And you can click on “find a loan officer” and just punch my name in, James Beaver, and then reach out to me that way. Brian Spitz Excellent, and if you or anyone you know is interested in selling a property and you’d like a free, no obligation quote on our house, you can reach us at bigstatehomebuyers.com. Announcer You’ve been listening to We Buy Houses with your hose Brian Spitz, President of Big State Home Buyers. Don’t forget to visit our website bigstatehomebuyers.com for more information on how to sell your house. We pay five hundred dollars for referrals, so tell your friends too. 0:04:41.7 (end of audio)