Government Loans for First Time Home Buyers

By | June 17, 2010

Government loans for first time home buyers are not that hard to come across. You may not think so, but the United States government is very eager to help consumers achieve homeownership through special government sponsored loan programs. If you want to know more about government programs that help people in buying their first home, it’s as easy as doing an Internet search for government home loans. However, in this article we are going to explain common government loans for first time buyers and who qualifies for these loans.

Federal Housing Administration Loan (FHA):

FHA offers special mortgage loans that are designed especially for first-time home buyers of moderate and low income families. These loans are backed by the federal government and are typically much easier to qualify for than a traditional fixed rate mortgage.

Although FHA does not actually make the loans they offer to borrowers, they provide their own insurance to protect the lender. Therefore, mortgage lenders take a much less of a risk because the loan is insured. If the borrower happens to default on their mortgage payments, the insurance will cover the loss.

It would be wise for any fist-time home buyer to explore FHA loan options because it will be quite simple to qualify for this type of a mortgage. Since the loan is going to be backed by the government, this makes the mortgage application much more attractive to lending institutions. Most borrowers who go for an FHA loan are young and in the early stages of their career. These individuals have a great advantage applying for this loan because of the simple qualifications and low costs that come along with this loan.

FHA home loans only require a small down payment at closing, unlike your traditional mortgage loan which may require up to 20% of the home’s value. This can be a huge plus for first-time home buyers as it is difficult to save up such a significant amount of money. At closing the FHA will only require a down payment of 3.5%, and that money can be obtained from various sources including the HUD down payment assistance grants.

Here is a basic list of qualifications:

-At least a two year steady employment history with the same employer.

-Must have a decent credit rating with a history that proves you can support the payment.

-Any foreclosure on record must be at least three years from the time of application.

-Mortgage payment typically needs to be around 30% of the borrowers gross monthly income.

VA Loan:

A VA home loan is guaranteed by the Department of Veterans Affairs and is offered to US military veterans. This type of loan may also be provided to widows or widowers who were the spouse of the veterans and active military personnel. However, if they are remarried then they may not qualify for this loan.

Individuals who are not married to military personnel cannot benefit from these loan program, regardless of their future intentions. The main advantage of this type of loan is that the borrower does not have to pay private mortgage insurance (PMI) and down payment.

The purpose for this type of mortgage is to allow financing for veterans or active members in areas where there is no private financing services available. Generally, these areas are small towns (rural areas) or cities that are located far away from major US cities.

The maximum loan is $417,000 and the seller will be paying all of the closing costs for the veteran or military personnel as long as it is not more than four percent of the purchase price. This is one of the few remaining loans that are provided without down payment and mortgage insurance. Normally, the borrower will have to pay for mortgage insurance if the down payment is less than 20 percent of the selling price.

The veteran will have to pay an additional amount known as the VA funding fee, which is 2.15 percent of the loan amount, if it is his first time to get a loan. He will not be required to pay this amount out of his pocket because it will just be added to the loan amount.

If you are still serving on regular active duty, you must include an original statement of service signed by, or by direction of, the adjutant, personnel officer, or commander of your unit or higher headquarters which identifies you and your social security number, and provides your date of entry on your current active duty period and the duration of any time lost.

USDA Rural Development Guaranteed Housing Loan:

The USDA Rural Development Guaranteed Housing Loan is another government home loan program that first-time home buyers may qualify for. This type of mortgage is provided to low income families who are looking to buy a new home in a Rural development area. There are quite a few benefits that come along with this loan including no down payments at closing and mortgage insurance will not be required, allowing borrowers with less than perfect credit to qualify.

This means that a qualified borrower may be able to finance up to 100% of the properties appraised value. The USDA loan does not have a limit for the maximum purchase price and home repairs may even be included in the loan. If you are looking to purchase a home that needs repairs, the USDA loan may allow you to include the repair costs in the mortgage.

These loans are perfect for low income families or first-time buyers who want to purchase a home in a rural area. The U.S. Department of Agriculture (USDA) developed this program to allow financing to those who cannot qualify for a traditional mortgage loan.

Any individual who plans on living in a eligible rural area as their primary residence may apply for a USDA Rural Development loan. However, the prospective buyer must be able to provide income verification and a credit history that shows their ability to repay the debt. This loan must also be used to finance a primary residence, individuals who own another home cannot qualify this type of assistance.

To find out if you qualify for any of these existing loan schematics, you can check out the Federal Housing Administration (FHA), Department of Housing And Urban Development (HUD) , or the U.S. Dept. of Agriculture (USDA). Depending on your individual situation, these government sponsored organizations will be able to help you in your home loan search.

5 thoughts on “Government Loans for First Time Home Buyers

  1. Brenda Johnson

    I am on SSI and looking for a 2 bedroom house or mobile home. I am expecting my mother may have to move in when she has depleted her trust and has no place to live. I am looking for a one story in a rural area with zone free included. I am looking to buy in the pan handle of Florida, southern part of MO. or southern part of OK or northern area of Texas. I am disabled and my conditions are expected to get worse over time. I am the only one left to care for my Mom.She is a bad diabetic,bad knee,hypothyroidism, and has signs of early on set Dementia. I am a widow. I am looking for first time buyer & any other programs that can help me. I have excellent credit. I am scared since I won’t be able to work and struggle to do daily things and don’t want to end up on the streets or in a tent somewhere. Can anyone give me advice. I never did this before so I need to know who & how to go about this.
    Thank you & God Bless.

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  2. irene smalls

    I am a single parent who has raised 3 children on my own, currenly my 18 year old and 21 year old still live at home with me, I am tired of paying someone elses mortage and figured if I can pay theirs why cant I pay my own and have a home to call my own,I need some sound advise as to the correct steps or leads to how I can get a first time home buyer loan for a decent home for myself and my children, I am a fulltime worker with good references from my employer I currently live in florida my credit isnt the best but it isnt the worst, I do have steady income besides childsupport for my daughter Im sure there has to be a way for me to acquire my own home on low income please help its my time to live the dream of home ownership thank you Irene smalls and family any advise input and leads accepted

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  3. Amber

    Im a single mother of two lil girls, we are looking to purchase a house, I have lived in my apartment for almost 5yrs and Im ready to have my own home, I have been through 3 landlords on this property and alm are realky nice but would really like my own, I have been at my job for 2yrs and I have a loan on my vehicle which is almost paid off, I was wondering if this is something that could help assist me in getting a home of my own!

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