A Primer on Government Mortgage Programs
Posted by NorthGaLife.com Team on Thursday, November 5th, 2009 at 9:56am.A Primer on Government Mortgage Programs
Government mortgage programs are often overlooked by both home buyers and mortgage professionals because of the stigma of having too much red tape. Today this sentiment is fading because other financing options are drying up and home buyers are part of an enevitable "flight to quality." Below is a short primer on each type of the governemts there most popular loan types--USDA, FHA, and VA mortgages.
FHA Loan Program
Federal Housing Administration Loans, commonly called an FHA Mortgage, are geared toward middle income and first time home buyers. FHA loans are made my normal mortgage lenders but given a favorable guarantee from the FHA so the lender gets paid back a portion of the loan amount should the borrower default. From a consumer standpoint this is good because it allows lenders to be less fearful and offer up better terms in the way of lower rater and lower down payment requirments. In fact, down payments on FHA loans start at just 3.5% which is lower than most conventional loan programs.
Limits on FHA loans are reasonable in most areas and allow for a pretty nice mortgage amount. For example, the single family loan limits in Gainesville, GA is $271,050--more than enough to buy a nice home and with a down payment of just under $10,000 it's pretty affordable!
In terms of hard borrower requirements the following is needed:
- 620 or higher credit score.
- No bankruptcy within the last 2 years.
- No foreclosure within the last 3 years.
VA Loan Program
VA Loans are exlusively for veterans and active-duty member of the military. The Veterans Administration offers a similar loan guarantee to the FHA in order to incentivize lenders to make VA Mortgages. The instant draw to the VA Loan program is the fact that it requires NO down payment. Obviously many buyers don't want to be leverages so high and don't go this route but it's attractive to people in a low savings but high monthly income situation.
The nationwide limit for conforming VA loans is $417,000. In high cost areas this limits can go as high as $729,000. VA loans have the same credit requirement as FHA loans (620 score) but allow borrowers to have even higher debt to income ratios so they're a bit easier to qualify for. Overall, VA loans are often the best route for Vets seeking to buy a home and get in with little money down.
USDA Loan Program
USDA loans, guaranteed here by the United States Department of Agriculture, were created to provide financing for buyers in rural areas. "Rural" is defined very loosely by the USDA and often can mean areas just outside of large metropolitans statistal areas. You can find out what areas near you qualify on the USDA's official site.
Credit scores and bankruptcy/foreclosure requirements are the same on USDA as the two programs above. Monthly housing costs must fall between 29% and 41% of your monthly gross income and there are some income limitations as well. Like VA loans, USDA loans don't require a down payment so if your area qualifies they can be a great way to finance with very little cash out of pocket.
A guest post courtesy of Brandon Laughridge of www.mortgageloanplace.com
Cal Carter
Keller Williams Alabama Gulf Coast
Technology Coordinator for NorthGaLife.com and GulfShoresLife.com
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This is the kind of information that many potential home buyers will be very interested in so I have shared it across Social Networks.
Posted on Friday, December 18th, 2009 at 2:28pm.
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Government Mortgage program is a really good program that reduces the number of home foreclosures.
Posted on Monday, November 9th, 2009 at 5:19am.