April 13, 2021

Three government loans and how they make homeownership possible

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Finding the right mortgage when buying a home is one of the most critical steps to successfully buying a home. Most conventional loans vary on what they deem to be an eligible applicant, with most of them having better benefits for applicants with higher credit scores. However, what most conventional loans have in common is that they have a down payment requirement of 20%, which is an amount of money that most Americans do not have. 

Thankfully, three government home loans have more average credit score requirements and significantly lower down payment requirements. Also, there are ways of using these government loans so that a buyer pays little to no money down. These three government loans are guaranteed and protected by the Federal Housing Administration (FHA), the Department of Veteran Affairs (VA), and the U.S. Department of Agriculture (USDA).

Federal Housing Administration Loans     

Loans guaranteed by the FHA are perfect for first-time homebuyers because they offer lower eligibility standards than most other mortgages. These loans also offer some of the best benefits out of any other mortgage. 

FHA loans have a down payment requirement of 3.5%, much lower than the conventional standard of 20%. Also, these loans allow applicants to use an FHA down payment assistance grant to pay for the down payment, reducing initial costs to zero. In addition to their low down payment, these loans also have lower monthly mortgage payments and can be taken out in 15 and 30 year fixed rate mortgage options.  

FHA loans are also subject to loan limits which vary depending on the county and its cost of living. Lower-cost counties currently have loan limits of $356,362 for single-family homes, $456,275 for duplexes, $551,500 for triplexes, and $685,400 fourplexes. Counties with higher costs of living have higher loan limits for the same types of properties. 

Veteran Affairs Loans   

Exclusive to current and former qualifying members of the U.S. military, experts widely consider VA home loans the best government loans available. As such, these loans have incredible benefits, which include low monthly mortgage payments, lower interest rates, no-prepayment penalties, the ability to finance the VA loan funding fee, and a no down payment requirement. 

Additionally, as of January 1st, 2020, VA home loans are no longer subject to loan limits. While first-time buyers had to limit their options regarding what home they would buy based on the VA loan limits, the removal of loan limits has made how much the borrower can pay the only limitation. However, there is a limitation to the new law for borrowers with more than one active VA loan. Second-time borrowers are still subject to VA loan limits which in most counties is at $548,250.

U.S. Department of Agriculture Loans   

Targeted towards low-income borrowers who want to buy a home in a part of rural America, USDA loans have benefits like a no down payment requirement, low monthly mortgage payments, and competitive interest rates. Eligible applicants must not only have a low-income lower than the county’s low-income limit, but they must also have a credit score of 640, a dependable and stable income, and be a U.S. citizen.  

Eligible properties must be in rural redevelopment areas and must be modest single-family homes. These loans’ goal is to promote home ownership in rural America, increase rural populations, and boost their economies.    


All three of these government loans offer excellent benefits for people who use them when buying a home. Therefore it makes sense that more and more Americans are gravitating toward these government-guaranteed home loans. 

Phil Georgiades is the CLS for FedHome Loan Centers, a government-sponsored brokerage specializing in first-time buyer loans. Phil has more than 22 years working in the real estate industry. For more information about government loans or submit a home loan application, call us at (877) 432-5626.   

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