If you're thinking about buying a house, it's important to consider the options you have for a mortgage. There are many different types of mortgage loans, with various interest rates and repayment terms. Some home loans are protected by the federal government, though conventional loans are not. There are several benefits of getting mortgages that are backed by the federal government because they are generally more secure.
FHA 203 Loans
FHA stands for Federal Housing Administration. According to the National Association of Home Builders, FHA loans can have either fixed or variable interest rates and they require low down payments. FHA loans allow many people who would not qualify for conventional loans to be able to buy a house because they require only 3.5 percent down and have low credit requirements. FHA loans are are insured by the FHA, so that if the borrower defaults, the FHA, a division of the Department of Housing and Urban Development, will assume responsibility for the loan.
FHA 203 (K) Loans
The FHA 203 (K) program is different than a standard FHA loan. Although it is also backed by the Federal Housing Administration, FHA 203 (K) loans are for the specific purpose of fixing homes that need rehabilitation. According to the Department of Housing and Urban Development, FHA 203 (K) loans allow a person to purchase a home and fix it with the use of multiple draws of money to reimburse rehabilitation expenses.
Indian Home Loan Guarantee Program
The Indian Home Loan Guarantee Program is a mortgage program run through the Department of Housing and Urban Development. It aids American Indians who would like to own a home in their tribal areas. With a mortgage from the Indian Home Loan Guarantee Program, a qualified borrower has to pay a low down payment and a one-time funding fee.
VA Loans
VA loans are also protected by the Federal Government. According to BankRate.com, only active members of the U.S. military and veterans qualify for VA loans. One benefit of VA loans is that they do not require a down payment. VA loans require the veteran to pay an upfront funding fee for the loan, which is usually around 2 percent of the loan amount. VA loans are guaranteed by the Department of Veteran's Affairs. BankRate.com states that every veteran has an entitlement up to $144,000 for a VA loan. This means that the Department of Veteran's Affairs only guarantees up to $144,000 per veteran and no more. The veteran can still get a loan for above $144,000, but they will have to seek additional financing.
Guaranteed Rural Housing (GRH) Loan
Freddie Mac, the Federal Home Loan Mortgage Corporation, is a government-sponsored enterprise that runs the GRH loan program. GRH stands for Guaranteed Rural Housing and the program aims to loan money to borrowers in rural areas who do not have many other financing options. According to Freddie Mac, borrowers do not need to make a large down payment for GRH loans, but they do have to qualify based on income and credit history.
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