Many Americans would love to own a home that they can call their own. However, a large segment of the population either cannot afford the high down payment demands of a conventional mortgage, or they have credit issues that prevent them from qualifying for a loan from traditional lenders.
Enter, the option of government-backed home loans. The federal government established the FHA, VA and USDA home loan programs to encourage affordable home ownership for eligible borrowers. Since the 1930’s, government-backed home loan programs have allowed millions to buy, sell and refinance their homes.
FHA, VA and USDA home loans have easier qualification standards with the intention of making home ownership more affordable to many Americans.
Government-Backed Home Loans
For eligible individuals and families, FHA, VA or USDA home loans could be the easiest path to sustainable home ownership. Factors like your credit situation, the location of your property and your citizenship status will help determine which loan program you will be best for your situation.
FHA Home Loans
FHA loans feature some of the broadest eligibility requirements of the government-insured loan options.
The easiest type of real estate loan to qualify for, the FHA loan only requires a small down payment of 3.5 percent and is accessible for borrowers with a less than ideal credit history. To qualify for an FHA loan, an applicant must be able to meet the following criteria:
- Two years of current and steady employment
- Lawful residence in the country, a valid SSN and current legal age to sign a mortgage.
- Accessible funds that can cover a minimum down payment of 3.5 percent (note: down payment money can be gifted from family members and the closing costs can be paid for by the lender, seller, or the employer of the borrower for up to six percent of the sales price).
- Most be 24 months removed from a bankruptcy with good credit
- Must be at least 36 months removed from a foreclosure with good credit
- Mortgage payment needs to less than 31 percent of the applicant’s gross income monthly
- Total monthly debt must be lower than 43 percent of the applicants monthly income
- A minimum of a 580 credit score. Borrowers can be approved with a score less than 580 but a larger down-payment is required. Borrowers with no credit score can also be approved. Call for details.
For more details on eligibility requirements, visit the FedHome Loan Centers FHA Requirements Page!
Flexible credit qualifications make FHA loans very appealing to first-time home buyers as well as buyers looking to upgrade. Click here for further information about the eligibility requirements and the benefits of FHA loans.
If you have served in the armed services, or if you live in a rural community, there are some attractive down payment options available to you in the form of VA and USDA loans, which are covered below. If you are not eligible for these programs an FHA loan might be the best option for you.
VA Home Loans
For those that have served in the military and qualifying spouses, a VA loan may be your best option. The VA loan requires 0% down payment, no mortgage insurance premium and no pre-payment penalties. Like many of the other government loan options, VA loans have easier qualification requirements than conventional loans. For those that are eligible, VA loans have some of the most attractive features on the market. Learn more about the eligibility requirements for the VA loan here.
USDA Home Loans
If you live in a rural area, the USDA home loan program may be the right choice for your situation. For the purposes of the program, the USDA defines a “rural community” as an area that has a population of under 10,000 people. However, communities with populations of less than 20,000 can also be considered if they are located outside a large metropolitan area. Like the VA loan, USDA loans also offer a 0% down payment. If you’re interested in learning more about USDA loans, click here.
Additional Resources
Check out the resources below to learn more about the FHA, VA and USDA loan programs. For a free qualification assessment, complete the form on this page or call FedHome Loan Centers at 888-432-5626.
