Government Subsidized Home Loans (USDA, FHA, VA Loans)

If you are like most people, you do not have enough cash to go buy a home. Thankfully, the US government is offering a helping hand to those who want to buy a home.

Government subsidized home loans are easy to qualify for and require little or no money down. The 3 main types of government subsidized home loans are VA Loan, FHA Federal Home Loan, and the USDA Rural Loan Program. Which loan is best for you will be determined by 1) property location and 2) your US citizenship status.

If you or your spouse have served or are serving in the United States military, the best loan program is the VA loan program. The VA loan is a $0 down government loan program that can be used as many times as you want. The VA loan has stipulations that require the seller to pay for buyer closing costs. Closing costs happen on all properties. The buyers closing costs include the first mortgage payment, taxes and related. VA loans can be used for almost any property (in the USA or US territory) that is in move-in-condition. If you are not a veteran and want to buy a home in a rural community, the USDA home loan may be the right loan for you.

USDA loans, are similar to the VA government guaranteed loan wherein there is no down payment required. Either the seller or buyer can choose to pay buyer closing costs. USDA loans can be used for move-in-ready property or for property rehabilitation. The program offers assistance to low- and moderate-income rural residents whose household income is equal to or less than 115% of the area median income. The restriction for USDA loans is that the property must be in a rural area. A rural community generally has a population of 10,000 or less; however, a community with a population of 20,000 or less can be considered “rural” if it is located outside a metropolitan statistical area (MSA). If you are looking for a fixer-upper, want to live in a major metropolitan area, and do not have military service, an FHA loan may be the best program for you.

FHA loans can be used by any American citizen (and by some foreign nationals) over the age of 18. FHA loans can be used for rehabilitation, construction or homes in move-in-condition. Unlike VA or USDA loans, FHA loans require a small down-payment. The good news is that with government assistance and when buying a government owned foreclosure, the down-payment can be as low as $100.

Regardless of the loan type, all government home loans must be inspected and independently appraised. The good news is that almost any home in the United States can be financed by some type of government subsidized loan product. However, each loan type has separate standards of property condition.

In order to get loan approval, basically all you need are:

  1. The home must meet certain minimum inspection and value standards.
  2. The borrower must have enough stable income to pay their debts on time and an acceptable credit score (some bad credit is allowed on a case by case basis). Considering how easy the process is, a government subsidized home loan may be the best option for you.

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