Guest Post: Government Backed Mortgage Products

Dawn Griffin Posted by
Market Conditions, Mortgages and Loans Aug 2010

Below is a Guest Post from James Kelley regarding Govenrment Backed Loans

Although requirements for conventional home loans and even government-backed mortgage

plans have become stricter, three programs continue to remain buyers’ favorites and offer a

multitude of incomparable benefits: FHA, USDA and VA loans. With decent credit scores and debt to income ratios, the unique opportunities provided through these three programs increase. However, they are also known for being prime home loan programs that help low income families achieve their dreams of homeownership. What do they offer and how

can they help?

FHA and USDA Loans

For USDA loans, the U.S. Department of Agriculture secures them. So, only homes within rural localities can be bought with this mortgage program. Different from the FHA, it does not require a down payment. The FHA loan asks for a 3.5% to 5% down payment on a home, and conventional loans can be up to 20% and more. Other perks include 100% financing, no monthly mortgage insurance fees, and the actual mortgage payment is sometimes lower than the FHA loan. There are household income limits for the USDA loan.

The Federal Housing Administration insures the FHA loan. Unlike the VA and USDA loan, the FHA has no location or vocation requirements. It’s open to everyone.An FHA loan has lower closing costs and no income limits, which is ideal for lower to middle income families. Another great feature of all three programs alike is the buyer can use gifted or borrowed money towards payment of the home. Times are hard, and sometimes people need to go to relatives or friends for a little financial help. Conventional loan programs will not allow such assistance.

VA Loans

The VA loan program is a unique plan for service members. Not many U.S. Veterans utilize or even know about the Department of Veteran Affairs offer to back a home loan for them. In a few short years, the loan has gained increased popularity among lenders.

It offers

• A stress-free process

• 100% financing

• Less strict credit and income standards than conventional loans

• No prepayment penalties or private mortgage insurance payments

• A buyer can receive a loan up to $417,000

It’s been a good year for veterans. An extension on the tax credit, plus the U.S. Department

of Housing and Urban Development’s efforts to provide affordable housing to eligible military

members makes now a great time to buy a home.

How to obtain a VA Loan

• A veteran must be able to show that he or she was honorably discharged, or served at

least 90 days on active duty during war or 181 days on active duty during a time of peace.

• 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 VA Lender.

• Fill out a Certificate of Eligibility form.

• Find a certified <a href=””>home appraiser</a>.

Some cons

• 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 charge.

All three programs can help one’s family to potentially obtain their dream home. However, pay

close attention and research which program will save the most money. A lending counselor can

help families to discover their options.

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