Money and credit issues often stand in the way of Americans buying their first home. But many of us are unaware of the government home loan programs available that make it easier to become a home owner. Are you familiar with the programs listed below?
If we could say one thing about first time home buyers, it is this: Far too many are CERTAIN they cannot get a home loan because of credit and financial problems, but in reality, it is often not the truth.
Why is that? The government home loan FHA program, that's why. The Federal Housing Administration backs this mortgage program – this is a big secret that many people are unaware of. Because of the government backing of the FHA program, it is possible for those with bad credit and average income and finances to be approved for home loans.
For example, even if you have a credit score as low as 580, you may still be approved for a home loan with a 3.5% down payment with FHA! Many potential home owners would be shocked to learn this, but it is the truth. You DO need to prove on paper that you have the income to pay the loan, and your bills in recent months need to have been paid on time. But yes, with a low credit score in the high 500s to low 600s, you may be approved for a home loan.
Another startling secret of this government backed program – government guarantees mean you can sometimes get a rate that is lower than market rates! The rate you get is not tied to your credit score, so a person with bad credit could have a rate below market! Wow!
There are other government-backed home loans that you can get if you have average credit and low income. One of the least-known programs on the market is the USDA loan program. As the name suggests, these loans are backed by the USDA. They are rural home loans, designed for people who are going to buy in rural areas. But some homes in suburbs on the edge of major cities may qualify as well.
The government guarantee also ensures that the lender will be paid off if you default on the loan. Thus, the interest rate is very low, usually lower than even FHA. And, you can possibly put zero down.
Note that you do need to have a higher credit score than the FHA program. Expect to need a 640-credit score to get the fastest processing. Below 640, you may still qualify, but the lender may want to see more documentation about your payment history.
One thing to know about these loans is there are income restrictions. You cannot have above 115% above the average income for the area you want to buy. If you cannot fit into this window, you may want to opt for an FHA loan, which is still a great program with only a 3.5% down payment.
If you are a vet or active military, it is hard to beat the government backed VA program. This home loan program is reserved for our veterans and military as a way to thank them for their service.
VA guarantees part of the loan. It makes it possible for lenders to offer some really great features. VA loans have lower rates than FHA, no mortgage insurance, and no down payment. You do not even need a minimum credit score to be considered. And if it becomes hard for you to make payments, the VA can work with your lender to prevent foreclosure.
This is a great government-backed program that offers housing purchase help for police officers, firefighters, EMTs and K-12 teachers. Through this government program, you may be eligible to receive a 50% discount on a home's listed price in areas of the country known as revitalization areas.
With the program's website, you can look for available properties in your state. You must live in the home for at least three years.
These are government-backed entities that support lower income and credit programs. While the loans are not guaranteed by the government, you can still get a loan with a low 3% down payment and low credit score.
Each of these government backed programs provides potential home owners with viable options for home financing.
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