Not Enough People Are Taking Advantage of Government Home Loans
Not Enough People Are Taking Advantage of Government Home Loans
Government Loan Programs
As the cost of housing rises every year, purchasing a home has become more and more difficult for most people. This upward trend has been fueled by the constant increase in demand for housing and a conflicting low supply of homes.
Even as we deal with the biggest pandemic in the last 100 years, median home prices continue to rise. Many millennials who are just reaching home-buying age can attest to how difficult homeownership has become. Most conventional loans ask for high credit scores and a 20% down payment. This further increases the hurdles new home buyers must navigate on their path towards homeownership.
Thankfully, government-guaranteed home loans are available, and they can make homeownership a reality. These loans offer more lenient eligibility requirements and several other benefits.
They’re issued by the Federal Housing Administration (FHA), The US Department of Veterans Affairs (VA), and the US Department of Agriculture (USDA).
How FHA Home Loans Work
These types of loans are beneficial for anyone who wants to become a homeowner. However, they’re very popular amongst first-time homebuyers looking for a more affordable alternative to conventional loans.
FHA home loans have some of the most lenient requirements out of any home loan available. These include a steady employment history (at least two years), closing costs that can be covered by either the seller, lender, or the borrower’s employer. Besides these, FHA home loans require a 3.5% down payment, much lower than the conventional loan requirement of 20%.
Having these flexible eligibility requirements is not the only advantage that borrowers could have through an FHA loan. There are also several other benefits to FHA home loans, like lower monthly payments, lower closing costs, and the ability to borrow more than the property is worth to finance the repairs and upgrades to a property.
VA Home Loans and Their Outstanding Benefits
VA home loans are perfect for Veterans, Active Duty Service Members, and eligible spouses who want to become homeowners. To qualify for these loans, the applicant must meet their property, income, credit, and military requirements set forth by the VA.
To be eligible for these loans, the applicant must have served for at least 90 consecutive days during wartime and 180 days during peacetime. Members of the National Guard and reservists must have served at least six years. Besides these service requirements, VA home loan requirements include property, income, and credit score requirements.
After eligibility is determined, the applicant will enjoy some of the best benefits available on any home loan. The benefits include a no down payment requirement, lower monthly costs, no-prepayment penalties, no mortgage insurance premiums, and lower interest rates. By taking advantage of these benefits, the applicant might become a homeowner in an increasingly more expensive housing market.
USDA Home Loans For Lower Income Earners
Both FHA and VA offer excellent alternatives, for people in the lower middle class, to the often expensive conventional home loans. However, the dream of homeownership is not exclusive to people in the middle class. That is where USDA home loans come in. Loans administered by the USDA are meant for lower-income families that would otherwise not qualify for FHA or VA home loans.
Being eligible for these loans requires that applicants live in a rural development community and that their income is low to moderate. Moreover, the property that is used for the USDA home loan must be a modest single-family home with no extra features like in-ground pools. The home should also not be used for any business purpose whatsoever.
A minimum credit score of 640 is recommended, alongside a history of stable income for at least two years. Some benefits to taking out this loan are that it requires no down payment, the borrower will enjoy lower interest rates and lower mortgage insurance payments.
Bottom Line
For most Americans, owning a home is a dream they work hard to realize. However, for many who may not be informed about government-backed home loans, this dream might seem unattainable. Mostly due to the high cost of conventional loans and often unforgiving eligibility requirements.
However, through government loans, borrowers can now qualify for a mortgage on a home and save more money than they would have with regular home loans.
Phil Georgiades is the CLS for FedHomeLoan.org, a lender specializing in first-time homebuyer loans. He has been practicing real estate for over 23 years. To learn more about programs available to you or apply for an FHA loan.
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Not Enough People Are Taking Advantage of Government Home Loans | OutFactors – Dallas Fort Worth, Texas
