Government Home Loans
Owning a home is part of the American dream for a lot of people. Unfortunately, not everyone has the means to turn their dreams into reality, especially with the current economic crisis going on. What people don’t know is that certain government agencies are willing to provide financial aid in order to help people get the home of their dreams. This article talks about the different government home loans available to people.
Kinds of government home loans
There are four kinds of government home loans that you can avail of. These are:
* VA loans. VA loans are a type of government loan available to veterans and their spouses. Issued by the Veterans Administration and backed by the federal government, these loans are much less expensive and have lower interest rates compared to conventional loans. Even veterans who have a poor credit history can avail of a VA home loan, however, they will need to fit the qualifications of the loan in order to avail of this. There are different VA home loans for home construction, improvement, and purchasing an existing house and lot.
The beauty of VA loans is that the Veterans Association allows the qualified individuals to finance the whole value of the home without any closing costs or down payments required, making the loan and the home buying much more affordable to the veterans and their families. Those who are on active duty only have a 6% interest rate. It’s also quite possible for borrowers to make interest-only payments, which is a guarantee that the creditors will not be able to foreclose the mortgage. However, do note that this will end three months after active military service is completed.
* FHA loans. FHA loans are government home loans from by the Federal Housing Administration. Technically, the FHA does not issue loans; instead, it ensures loans, thereby giving both the borrowers and the lenders better financial security, resulting in more affordable loan terms and conditions. The security provided by FHA makes it easy for individuals to take out loans, even those who may otherwise not qualify for the loan. Loans through FHA have minimal interest rates and require little down payment (usually set at 3% instead of the customary 10-20%), making these an attractive option particularly for first-time homebuyers.
FHA government home loans can either have fixed or adjustable rates, depending on the agreement between the lender and the borrower.
There are three kinds of FHA government home loans:
* Loans for those buying homes for the first time. These loans have a slightly higher interest rate compared to other loans as the government expects the borrowers to make small a down payment if they get this.
* Loans for those buying homes which need to be repaired. This loan will not only cover the purchase of the home, but also the cost of repairs to fix the damage or problem spots in the house.
* Loans for those purchasing a mobile home or a manufactured home.
These three have different qualifications, so do make sure that you read up on what these are before applying for any of these loans. Aside from these three, the FHA also offers loans for repair alone, as well as helps homeowners struggling to pay for their mortgage loans so they can keep their homes.
* USDA loans. The US Department of Agriculture has a home loan program for those who want to purchase a home in rural areas that qualify under the program. Like VAs, these government home loans don’t require down payments. Qualifications for this type of loan include residence, income, and the credit history of the borrower.
Borrowers will need to purchase a home in a qualified area that is either considered as an open country place or has 10,000 residents or fewer, although there are some instances wherein homebuyers were able to get the loan to purchase a property in an area in a city with about 10,000 to 25,000 residents. These government home loans cover both existing homes and homes that are yet to be built. Existing homes will need to be inspected to check for soundness before the loan is approved. The size and design of the home will not matter with USDA loans, provided that it’s considered modest based on the housing standards of the area.
* State and local housing programs. States, cities, and counties, also offer government loans for prospective homeowners to help them pay for the houses. More often than not, these locales offer financial aid to first-time buyers. Like the other government loans, these usually have smaller interest rates and require smaller down payment compared to other housing loans.
How to apply for a government home loan
To apply for the loan, you will first need to do your research to find out which loan best suits your needs and your situation (if you want to avail of an FHA loan, find an FHA lender). There are various government loan programs that are being offered, all of which have different qualifications, so do take the time to do research to see which one best fits your needs. The Internet is always a great place to start your search. Be sure to check not only the different kinds of loans, but also whether you fit the eligibility criteria. Check to see the interest rate as well. While government loans are more affordable compared to loans taken out of private financial institutions, these are still loans, which means you will need to pay for these eventually, so make sure that you shop for the type of loan that has rates that are budget-friendly. Once you’ve chosen the loan, fill up the application form. Be sure to provide correct information, as giving the wrong data can result in your loan being rejected, or you may find yourself subjected to penalty. Once you get the loan approval, you can then begin house hunting. Stick to the price range based on your budget and the loan you received so you don’t overspend. Once you’ve chosen the home you want, negotiate for a reasonable price and close the deal.
Government home loans make it easier for you to finally get the house of your dreams. As with other loans, be sure to take the opportunity to shop around so you can find the best rates so you can pay for your home without having to burn a hole through your budget or paying for a mortgage loan that doesn’t set you back years financially.