Government Home Loan

Government home loans allow people to receive financial assistance toward the purchase of a house when saving money is not a possibility. FHA funding from the Federal Housing Administration or assistance from the VA or Veteran Administration are just a few of the programs that consumers can seek. Both government home loan programs are guaranteed by the federal government. The FHA funding is sponsored by the US Department of Housing Urban and Development. It is primarily used for first time buyers; however variations have recently been added to allow more flexibility. The FHA program was established in the mid 1900's as a way to allow low to moderate income families the opportunity to purchase a house.

Typically FHA funding is granted through the traditional lending institution. In traditional mortgages, a 10%-20% down payment is required to secure the mortgage. With the FHA government home loan, a 3% down payment is all that is required. This makes an extreme difference in whether or not a person will ever be able to buy a house. For example: to purchase a $150,000 home, a traditional mortgage would require $15,000-$30,000 down. Low to moderate income families would never be able to save up this kind of money for the purchase of a house while paying rent. Through FHA government home loans, those families will only have to save $4500 to qualify.

In recent years, with housing costs continued to skyrocket, the FHA program has allowed for 100% financing. This is a new concept and no all lenders offer this type of government home loan. FHA government home loans also allow the borrower to wrap all closing costs into the mortgage. This amount would normally cost the borrower an additional $1200-$5000 in cash at closing. Closing costs are typically the responsibility of the buyer unless otherwise agreed upon. By allowing the closing costs to be wrapped into FHA funding, a low to moderate income family can actually realize their dream of owning a house.

The other type of program that many people may seek is the VA program. This is only available to veterans and their spouses. It allows for 100% financing with zero down. VA government home loans also allow the borrower to wrap the closing costs into the mortgage. Both FHA and VA programs have a limited price for which the borrower can purchase a house. These limits are based on geographic location and the housing market in the area. The unique rule for a VA government home loan is the ability to purchase multiple dwellings simultaneously while staying under the limit, and the option to use the program over and over again, once the balance on the loan has been paid. With assistance from the VA, people can also receive direct loans in instances when a veteran cannot meet bank qualifications. "Through wisdom is an house built; and by understanding it is established" (Proverbs 24:3). Taking the time to consider all available options and funding before purchasing or building a house will allow the consumer to make the best financial decisions.

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