FHA Mortgage Loan versus Conventional Mortgage Refinance for Debt Consolidation

November 26th, 2007

Tip! Make sure your loan doesn’t carry a pre-payment penalty, or it will cost quite a bit extra to refinance later on.

The term conventional loan includes loans under the current lending limits set by the Federal National Mortgage Association (FNMA) and the Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Fannie Mae and Freddie Mac, respectively. A Federal Housing Administration (FHA) loan is a loan based on an insurance program that enables you to buy a home with a down payment of as low as 3%. FHA is administered by Housing and Urban Development (HUD). It is one of two government loan programs available to borrowers. The other is a Veterans Administration (VA) loan, available only to veterans of the military service.

The FHA loan program, similar to conventional loan programs, allows for mortgage refinancing of owner occupied properties as fixed mortgage rate loans and adjustable rate mortgages (ARMs). Similar to conventional refinances, FHA refinances can be used for such purposes as:

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