NC101

• Share
  • Share this post on
  • Digg
  • Del.icio.us
  • Technorati
  • Twitter
  • 
  • 
  • 

In an effort to give more US citizens the opportunity of home ownership, the federal government has several programs in place designed to assist eligible buyers. Here is a brief overview of three of those programs.

FHA Loans

In 1934, the Federal Housing Administration established an assistance program for those Americans who could not afford to initiate a home purchase because of their inability to afford the price of a typical down payment. Today the program also provides funds for private mortgage insurance. This program came about as so many Americans were trying to recover from the hardships brought about by the Great Depression. At that time, the rate of loan defaults and foreclosures was quite high.



The Federal Housing Administration guarantees FHA loans. The FHA must approve mortgage lenders who participate. After the serious mortgage crisis that took place in 2008, several changes have been made to the program, which make it easier to qualify. With FHA financing, down payments and closing costs are considerably lower. Many portions of the closing costs and other fees are included in the loan. This type of home financing also is available for manufactured and mobile homes. The needs of landowners and those who will reside in a mobile home community are also addressed.

Provisions have also been made for those who are buying homes in need of repair and for making energy efficient improvements. FHA loans may be very attractive to first time homebuyers, due to some tax credits they could be eligible for. FHA financing also allows qualifying homeowners who are 62 and over, to increase their cash flow by converting part of their home’s equity to cash with an FHA Reverse Mortgage.

Finally, with an FHA loan it is possible to purchase something other than a single-family home. One to four unit properties that qualify may be eligible for FHA financing. It is also possible to consolidate debt and refinance with an FHA mortgage.


VA Loans

The VA Loan Guaranty Program came about in 1944 as a means to allow returning members of all branches of the US military to experience the dream of home ownership. A VA loan is atypical from a traditional loan because the VA promises to repay around 25% of every loan it guarantees, in case the borrower defaults.

VA approved mortgage lenders in turn have less risk when accepting military borrowers. The program also spawns very competitive terms and rates for the veterans who qualify. A major benefit of VA loans is that they give borrowers the ability to pursue a home purchase without a down payment. Currently, the USDA Rural Housing program is the only other type of loan with this option.

Recipients of VA loans also enjoy more lenient underwriting standards and do not have to pay for PMI-private mortgage insurance. PMI is typically a monthly expense unless the prospective homebuyer can put down a minimum of 20% on the loan amount.

Other VA loan benefits include:
-A higher debt-to-income ratio
-No penalties for prepayment
-Can be used to repair, improve or refinance the home
-Farm properties, mobile homes, and condos may be eligible to purchase with VA funds

To find out all of the details on how to qualify and determine eligibility requirements, contact a VA approved mortgage lender. In the meantime, here are a few eligibility categories to consider:
-Spouses of those killed while in the line of duty
-National Guard members and Reservists who have put in a minimum of 6 years
-Members of all branches of the military who have served 181 days on active duty or 3 months during war time


USDA Mortgages

Similar to the two previous programs discussed in this article, the USDA’s mortgage program was established to enable a specific group of citizens the opportunity of home ownership. Since it began in 1949, the US Department of Agriculture’s loan program has empowered over 2.7 million citizens the chance to purchase homes in rural areas. The program has formed partnerships with carefully selected lenders in each state. The partnership comes with a guarantee from the USDA that should any borrowers default on a loan received from the program, that the lenders have a repayment guarantee from the USDA. That way, the mortgage lenders can proceed with confidence and offer home financing to those individuals who meet the USDA Rural Development guidelines.

Since changes were made by to the program in 2009 as part on the American Recovery and Reinvestment Act, even more potential homebuyers eligible for this type of loan. USDA rural housing loans are among the few zero money down mortgage loans available to persons outside of the military. As with VA loans, no PMI is required and those with damaged credit can apply. Borrowers pay what they can afford based on their income, and the loans are 30-year fixed rate loans. The goal is to have lower monthly payments, in hopes of ensuring the success of the borrowers.

Although they were first geared towards rural properties, today there are eligible properties closer to the suburbs and more developed areas. Even some homes deemed “fixer-uppers” might qualify. Usually, the rehabilitation funds are included in the total loan amount. Although the current USDA Rural Housing loan guidelines are more flexible, potential borrowers still must qualify based on credit, income, and other factors.

To find out all of the details on how to qualify and determine eligibility requirements for any of these programs, contact a professional mortgage lender.