MOST Common Government Loan Programs

On this page, we will highlight the following most common government loan programs:

• FHA Loans
• VA Loans
• USDA Loans

FHA loans

An FHA loan is insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD). The FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations. Available to all buyers, FHA loan programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans.

FHA loan programs are particularly beneficial to those buyers with less available cash. The rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans.

Some of the other benefits of FHA financing:

• 3.5 percent down payment is required, which can be funded via gift funds from an a number or sources. Please call me for a list of those allowable sources. *** Please note that as a result of the Housing and Economic Recovery Act of 2008, Down Payment Assistance that is seller assisted was no longer allowed after September 30, 2008 ***
• The borrower can obtain a 2nd mortgage from an allowable source for their 3.5% down payment, for a total of 100% financing.
• FHA loans are also used to purchase a HUD REO home and you are only required to put $100 down on these loans. Click Here for more info.
• Lower monthly mortgage insurance premiums and, under certain conditions, automatic cancellation of the premium.
• More flexible underwriting criteria than conventional loans and better rates than conventional loans in our current market for borrowers with credit scores less than 720
• FHA limits the amount lenders can charge for some closing cost fees (e.g. the origination fee can be no more than 1% of mortgage).
• Loans are assumable to qualified buyers.

VA Loans

VA guaranteed loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home. The guaranty means the lender is protected against loss if you fail to repay the loan. In most cases, no down payment is required on a VA guaranteed loan and the borrower usually receives a lower interest rate than is ordinarily available with other loans.

Other benefits of a VA loan include:

• Closing costs are comparable and sometimes lower - than other financing types.
• No private mortgage insurance requirement.
• Right to prepay loan without penalties
• The Mortgage can be taken over (or assumed) by the buyer when a home is sold.
• Counseling and assistance available to veteran borrowers having financial difficulty or facing default on their loan.

Although mortgage insurance is not required, the VA charges a funding fee to issue a guarantee to a lender against borrower default on a mortgage. The fee may be paid in cash by the buyer or seller, or it may be financed in the loan amount.

A VA loan can be used to buy a home, build a home and even improve a home with energy-saving features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA.

Veterans can apply for a VA loan with any mortgage lender that participates in the VA home loan program. A Certificate of Eligibility from the VA must be presented to the lender to qualify for the loan.

USDA Loans

USDA loans offer huge benefits to potential homeowner's. These loans are backed by the USDA (yep -same as the USDA Beef - Dept. of Agriculture).

The biggest kicker to beign able to receive this loan is that the property has to be located in certain Geographical Areas (Metro Atlanta has several counties that qualify).

Highlights of ths program are:

• Up to 102% Financing (this means that the loan can included closing costs if the appraised value is higher than the sales price)--meaning ZERO (0) down payment
• NO Monthly Mortgage Insurance Premium
• Seller contributions and gift funds are allowed
• No minimum credit score. In some cases, a 620 credit score is needed in order to waive certain restrictions
• 30 yr fixed Rate Mortgages - at Very good rates- similar to FHA
• NO Prepayment Penalty
• Repairs can be financed into the loan in most cases