FHA Vs CONVENTIONAL: CHOOSING THE RIGHT LOAN FOR YOU

 Have you decided to purchase a new house or you simply plan to refinance your old house? Are you in need of a loan? Well, it is quite understandable that the big question that bother people’s mind at this juncture is: should I go for a Federal Housing Administration (FHA) loan or a conventional loan? While the types of loans have pros and cons peculiar to each of them, some loans are more suited for certain individuals, on the basis of financial status, than others. Find below a guide to choosing between a FHA loan and a conventional loan:

What is a FHA loan?

A FHA loan, appropriately referred to as a Federal Housing Administration loan, is a type of loan offered to individuals with a low amount of credit (about 500 credit score) and insured by the Federal Housing Administration. The loan is often offered to such individuals, because the lending body is not put at financial risk as the loan is guaranteed by the Federal government.

Who should go for a FHA loan?

If you are low on credit and need to purchase a new house or refinance your old house, going for a Federal Housing Administration (FHA) loan would be best for you, as the credit score needed to qualify for this loan is only 500, as opposed to about 640 credit score required to obtain a conventional loan. Also, only a 3.5% down payment is required for the approval of a FHA loan, as opposed to about 5 to 20% required by conventional loans. So, if your credit is very bad and you really need to do something about your house, going for a FHA loan is best.

What is a conventional loan and who should go for it?

A conventional loan is a type of loan granted to individuals with a very high credit score. The requirements for a conventional loan are much more demanding than the requirements needed to secure a Federal Housing Administration (FHA) loan. It should be noted that conventional loans are of two types:

  • Conforming conventional loan
  • Non-conforming conventional loan

Conforming conventional loans are loans that have terms and conditions which comply with the guideline dictated by the loan provider, such that the maximum amount of loan that can be granted is not exceeded.

However, non-conforming conventional loans are loans that exceed the maximum amount that can be granted to any loan seeker, as stated in the guideline of the loan provider. It should be noted that, non-conforming conventional loans are distributed on a smaller scale as opposed to the conforming conventional loan, and the borrower is thus, charged higher interest rates.

Furthermore, as opposed to the limitation in loan amount that can be granted by the FHA, conventional loans are much more flexible, as they give  borrowers a free hand, when it comes to the amount of loan that can be requested.

Also, conventional loans do not require payment premium mortgage insurance, as opposed to FHA loan, which requires such.

So, if your credit is good, you need some serious amount of money and you do not want to pay premium mortgage insurance, then, go for a conventional loan.

Check out with https://www.okcalculator.com for more informations and help.

What’s the Difference Between IRS Forms 1040 And 1040EZ?

Filing tax returns is one of the most hectic things Americans must do. It is tough and very demanding. As a taxpayer filing individual tax returns, IRS provides you with several options. They include: Form 1040, 1040A, 1040ES, and 1040EZ. Form 1040 is designed for people with complex tax situations but Form 1040EZ is for people with very simple tax issues.

Form 1040EZ

Requirements and characteristics of Form 1040EZ

  • It is an easy and simple form.
  • It has the highest number of conditions and restrictions.
  • Your marital status is of importance. You file tax returns through this form as a married couple together or as a single person.
  • You must have an income of 100,000 dollars or less.
  • You must be under the age of 65 at the end of the financial year.
  • You must be able to see.
  • You must have no dependent.
  • You must not be in the Chapter 11 bankruptcy after October 16, 2005 until to date.
  • Your income must only be from wages, salary, fellowship grants, unemployment compensation, tips, interest income of less than 1500 dollars and Alaska Permanent Fund dividends
  • You must not be paying household employment tax on wages of the household employees.
  • You should include your earned tips in box 5 and 7 of Form W-2.
  • Premium taxes should not have been paid on your behalf. You must have enrolled in coverage for whom no one else claims a personal exemption.

You must reach all these requirements to use Form 1040EZ.

Form 1040

This form can be used by anyone. Anyone who is self-employed, earns more than 100,000 dollars taxable income, owes household employment tax or itemize deductions must use this form. This is where the difference between Form 1040 and Form 1040EZ comes.

Requirements and characteristics of Form 1040

  • Complex Form to fill out.
  • You must have a taxable income of more than 100,000 dollars.
  • It is a more customizable document when talking about tax breaks. You can itemize your deductions.
  • There are options present to claim credits and deductions.
  • You owe household employment tax to household employee wages.
  • Is the only form for a self-employed taxpayer.
  • Your total insurance policy dividends are more than the premiums you paid.
  • You were a bona fide resident of Puerto Rio or American Samoa. You, therefore, qualify to exclude income from sources in these places.
  • There are situations that can only be accommodated by this form They include:
  1. You are a beneficiary of an estate or trust.
  2. The employer has not withheld Medicare taxes and Social security.
  3. You have adjustments form alternative minimum tax(AMT)
  4. You have income from a partnership or S corporation.
  5. You have distributions from a foreign trust.
  6. You have tips that you did not report to your employer.

If using form 1040EZ, you cannot claim dependents. Other than the earned income credits, you cannot claim tax credits. Or any adjustments to income. This is the main disadvantage of Form 1040EZ. If you want to benefit from claiming adjustments, credits or dependents consider using Form 1040. Form 1040 is more flexible and accommodative.

Read more in this post: http://www.thaisraelcc.com/who-all-qualify-to-file-form-1040ez/