The market for government loans is skyrocketing. More and more families are ready to settle down in their dream home, and government-backed mortgages seem like a way to make home ownership happen quickly and easily. Three loans programs in particular have become buyers’ favorites throughout the last few years: VA, FHA, and USDA loans. Whether you want to live in the big city or in the country, each loan has a variety of unique benefits and opportunities. So, let’s look at what these three major loan programs have to offer.
The Department of Veterans Affairs insures the VA loan for eligible veterans and members of the military. Over the past few years, the loan has gained increased interest among lenders, and it has a good reputation for its biggest benefit—no down payment.
What does a VA Loan offer?
• Stress-free process
• 100 percent financing
• Easier credit and income standards
• No prepayment penalties or private mortgage insurance
• Receive a loan up to $417,000
How do I get a VA Loan?
• You must have been either honorably discharged, or served at least 90 days on active duty during war or 181 days on active duty during a time of peace.
• Members of the Military Reserves and National Guard are required to have served a minimum of six years.
• One may also be determined eligible if one is a spouse of veteran who is missing in action, a prisoner of war or died from service related events.
• Find a mortgage lender who works with the VA loan.
• Fill out a Certificate of Eligibility form.
What might not be a benefit of the VA loan?
• In most counties, the VA only secures half of the loan.
• They are not open to everyone. You have to be a veteran.
• In most cases, there will be a small funding fee.
The Federal Housing Administration insures the FHA loan. Unlike the VA loan, the FHA is open to everyone. First-time and experienced homebuyers are using it to obtain a nice home with reasonable interest rates and many other benefits.
What does the FHA Loan offer?
An FHA loan has many of the same advantages as the VA program.
• Lower closing costs
• Less strict qualifying standards
• No income limits, which is a plus for low to middle income families.
• Used gifted or borrowed money towards your down payment
How do I get an FHA loan?
• Decent credit rating—note that credit does not have to be excellent, just good.
• Reasonable debt to income ratio
• Fill out the loan application
What might not be a benefit of the FHA Loan?
• You will have to cover 3% if not more of the down payment cost.
• Above average credit could get you more funding with a conventional than with an FHA loan.
• You will have to pay upfront mortgage insurance at the time of settlement.
Last, but not least is the USDA program. The U.S. Department of Agriculture guarantees the loan for rural areas. The USDA also does not require the home buyer to be a first-timer, and like the VA, is one of the last no money down home loans.
What does the USDA loan offer?
• No money down
• 100% financing
• No monthly mortgage insurance
• Usually lower mortgage payments than an FHA loan, making it a preferred choice among today’s buyers.
How do I get a USDA Loan?
• Be within the eligible rural area.
• Good income and credit scores.
What might not be a benefit of the USDA Loan?
• Restricted to certain rural areas—you could not purchase a house in the city.
• There are household income limits.
All three programs have great benefits and can potentially help you and your family obtain that dream home. Just be sure to decide which loan will be the most affordable and beneficial option for you. As with any major financial decision do your own research and feel comfortable with your choices before signing up for anything.