These days, everybody wants to save a little bit of money. Frugality is trendy and people are increasingly finding that pinching pennies is socially acceptable, due in part to the current state of the US economy.
While homeownership may seem like it doesn’t fit in with this new focus on frugality, the opposite is in fact true. Thanks to government-sponsored loan programs, a monthly mortgage payment can be equal to or less than monthly rent and a large down payment isn’t necessarily a requirement any longer. These programs can often make homeownership a reality for people who may otherwise never consider buying their own home and can make the difference between a comfortable payment and an unattainable one.
FHA Home Loan Program
Managed by the Federal Housing Administration, the FHA loan program is geared towards first-time homebuyers who are seeking a modest house for their area. The FHA loan program has less stringent credit requirements than traditional loan programs and potential borrowers who have had credit trouble or even declared bankruptcy in the past may qualify for a loan. Like most other government loans, the FHA program allows buyers to roll the closing costs associated with the loan (fees like surveys, assessments, loan charges, and lawyer’s costs) into the monthly payments, which can save them the hassle of having to come up with $6,000 to $8,000 at the loan closing. Additionally, FHA loans have low down payment requirements, and potential borrowers can anticipate having to come up with only 3% of the purchase price for their down payment in contrast to the 20% required by traditional loans. There are loan limits associated with FHA loans, but the amount is adjusted to each area’s cost of living to ensure that home buyers in every area can afford a modest home.
VA Home Loan Program
Available to veterans, active duty service members, and their families, the VA loan program is a wonderful option for members of our military. Administered by the Department of Veterans Affairs, VA loans also have generous credit terms and a variety of financing options to fit each borrower’s lifestyle and finances. While FHA loans have a low down payment option, VA loans provide both a reduced down payment and a zero down payment option (which may require more financial documentation) and also allow closing costs to be rolled into the loan amortization. Service members and veterans can utilize a VA loan for more than just one home purchase, making these loans even more adaptable to a variety of buyers and reassuring veterans and service members that they can use a VA loan again should the need arise. Just as with FHA loans, loan limits do apply but are adjusted based on an area’s cost of living. If you qualify with VA eligibility, VA loans are a great option.
USDA Home Loan Program
Open to low-income buyers regardless of military status or previous home ownership, USDA loans are another great government-sponsored program that can provide more potential home buyers with the means to buy a house. Each loan is backed by the US Department of Agriculture and is designed for borrowers who make less than the median income in their area. USDA loans feature some unbeatable terms, including a zero down payment option and the ability to finance the funding fee into the entire loan amount.
Regardless of which you choose, government-sponsored loan programs can be a huge asset to your home search. What’s more, since each agency only backs and guarantees the loan products and doesn’t actually make the loans itself, you can apply for each program through your bank or mortgage lender as with a regular loan and the process will be handled in much the same way. To find out more about these convenient, money-saving options, speak with your local lending agent today.
Photo thanks to Phae under creative common license on Flickr.