For those seeking to buy a home, a good place to look for help with loans is through the federal government. Some of the more useful and common loan programs that are currently being offered follow:
There are three government agencies that insure mortgages for homebuyers. The first is the Federal Housing Administration (FHA), which is part of the U.S. Department of Housing and Urban Development. The second is the Veterans Administration (VA) which works with active duty and non-active duty military personnel. The third is the Rural Housing Service (RHS), which is a branch of the U.S. Department of Agriculture.
Consumers should understand that only approved lenders can offer these loans to homebuyers, and there are certain required standards that the property has to meet in order to qualify for these loans.
Federal Housing Administration Loans (FHA)
Perhaps the most popular agency for home loans is the FHA. The FHA offers a mortgage financing program that insures home loans to homebuyers. The FHA does not actually make the loans to the homebuyers but instead it acts as an insurance policy for lenders. Because the financial requirements for FHA loans are more relaxed when compared to traditional commercial loans, more people are able to purchase homes.
FHA insurance work because it helps lenders to work with those who might not completely fit the lender's normal loan qualification requirements. FHA requirements reduce the debt-to-income ratio from 28/36, which is the traditional loan requirement, to 29/41 for FHA loans. FHA loans also require a lower down payment of only 5 percent or less, and they allow 100 percent of the money used for the down payment and closing costs to come from a family member. Traditional loans will not let buyers borrow the money used for those fees and payments.
There are maximum loan limits with FHA loans. These limits vary by state or region. You can visit the FHA website to find the limit for your geographical area.
VA Home Loans
Veterans Administration loans have their own policies and procedures. Qualified veterans and active-duty military personnel have been able to buy a home for as much as $417,000 without a down payment or private mortgage insurance for some time now. However the Government National Mortgage Association (Ginnie Mae) has changed its rules to allow larger VA loans if the veteran or service member can make a down payment of at least 25 percent of the portion of the home's price that exceeds $417,000.
For more information on the VA home loan programs that are currently available visit their website. There are some new changes, such as the one mentioned above, that consumers should look into if they qualify for a VA home loan.
Rural Housing Service Loans
For those who live in rural areas or small towns, they may qualify for a low-interest loan through the Rural Housing Service. The RHS offers both guaranteed loans through approved lenders and direct loans that are funded by the government. These loans are especially useful in helping low income families to get homes.
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