Comparing Government Loan Programs

For many families, meeting the strict criteria for conventional loans makes the idea of ever owning a home almost bleak. But thanks to the ever-increasing popularity of three very popular government-backed mortgage programs, more low to middle income families are finally able to set goals towards home ownership.

What are these three much loved programs? They are the VA, FHA and USDA loans. Each plan has special benefits and requirements that many first time and experienced home buyers are raving about.

The Benefits and Requirements
VA loans

For men and women serving our country, the VA mortgage program takes the stress out of home buying. Benefits include no down payment, 100% financing, less strict credit and income requirements, no prepayment or private mortgage insurance fees.

To qualify, a mortgage lender who works with the VA loan will help you to fill out a Certificate of Eligibility. The VA loan is only open to those who have been either honorably discharged, or served at least 90 days on active duty during war or181 days on active duty during a time of peace.

FHA Loans
The FHA loan is like the VA loan except the Federal Housing Administration secures the loan for anyone meeting the necessary qualifications, not just military personnel.

First-time and experienced home buyers can take advantage of the FHA loans reasonable interest rates and low closing costs. Also, the FHA mortgage program does not have an income limit and buyers can use gifted money towards the down payment. Unlike the VA loan, FHA does require a down payment amount of 3% to about 10%, which is considerably less than a conventional loan.

To qualify, a respectable (not excellent) credit rating is needed with a good income to debt ratio. A lender can help with the loan application process for an FHA loan.

USDA Loans
The U.S. Department of Agriculture secures the USDA loan for rural areas only, so no big city living. You have to be interested in buying within an eligible rural area. The USDA, like the VA, is one of the last no money down home loans. With a good income and credit score, you can qualify for 100% financing, no month-to-month insurance payments and a low monthly mortgage payment.

Each program requires the proper documents in order to complete the home ownership process. Talk to a mortgage counselor today and see which one best fits your needs.

Tagged: fha loans, home buyers