While we deal in government insured mortgages all day long, we understand that not many people understand what the phrase “government insured” means or which government backed home mortgage options may be available to them. To help our readers become more informed about these government programs, we’ve created this guide on the top three government insured home loan programs.
What Does it Mean When a Mortgage is Government Insured?
When a mortgage is insured by the government it means that the United States administration agrees to pay the financial lender the amount of a loan should the homeowner default or stop making payments to the mortgage. This insures the lender will be protected from any loss and improves the chances of a future homeowner receiving a loan.
How Does One Receive a Government Insured Loan?
All of the government loan insurance programs require a borrower to meet certain standards and criteria. However to actually receive a government mortgage, homeowners will need to find an approved lender. Each government program has a variety of requirements and procedures that need to be processed and those can only be processed by a trained professional who has been approved by the government program a homeowner is looking to utilize. There are several home loan programs that are insured by the American government but the top three programs include the Department of Veterans’ Affairs (VA), the Department of Agriculture’s Rural Housing Service (RHS) and the FHA (Federal Housing Administration).
The Department of Veterans’ Affairs (VA)
We always talk extensively about the VA insured mortgage programs that are available so in today’s post we will just give a brief overview. If you would like more in depth information, we encourage you to look at our VA information page or speak with one of our expert loan officers by calling 1.888.407.0010.
The Department of Veterans’ Affairs (or as it is commonly referred to, the VA) is the only government loan insurance program that is specifically for veterans of the United States Military. All veterans wishing to participate must obtain a COE (Certificate of Eligibility) and the eligibility is based off of time served during war (90 consecutive days) or peace time (180 consecutive days). This loan program is also available to unmarried surviving spouses of veterans who have passed on while actively serving or who have died as a result of service-connected disabilities/injuries. This type of insurance does not require a down payment at closing and may not require PMI (private mortgage insurance).
The Department of Agriculture’s Rural Housing Service (RHS)
The Rural Housing Service (RHS) guaranteed loan provides the opportunity to purchase a home to those in a lower or moderate income bracket. These families must purchase a single-family home within a rural area and intend to be the principal occupants to receive this mortgage insurance. No PMI is required because the government backs the loan to lenders. However, there are several eligibility requirements for those looking to take advantage of this government housing program. Those requirements include:
- Having an income that meets up to 115% of the house’s area median income
- Presenting a satisfactory credit history
- Having a steady income that pays enough to afford the monthly payments
- The inability to qualify for a conventional home loan and receive PMI
The RHS program not only insures the loan but also requires that lenders not expect a down payment or the need for mortgage insurance. Another positive about this government programs is that closing costs can be blended into the total loan amount.
The Federal Housing Administration
The Federal Housing Administration (FHA) is the most popular and well known government program in the country and was instated to help homebuyers receive home loans if they couldn’t qualify for PMI. This type of insurance has several requirements for the borrower but it also has several benefits. Those include:
- No limit on Income
- Use for larger homes including condos, mobile homes or multi-family homes
- Low down payments
- A portion of the closing costs can be financed
To learn more about the FHA financing and refinancing mortgage options that are available, we encourage you to check out our FHA resource page.
Government Insured Home Loan Programs
We hope that this brief overview of the top three government loan insurance programs has helped answer questions you may have had and shown you some programs to take advantage of. If you would like more information about any of these programs, please contact us.