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Government-Backed Loans: The Benefits of FHA, VA & RD Mortgages

Government backed loans are a very attractive option for those who are looking for a mortgage due to how easy that it seems to be to qualify and even more so because of their lower interest rates.

The government backed loan is not a loan that comes from the government to the borrower himself. The government simply makes a promise to the lender that the loan will be paid even if the mortgage holder does not make the payments. Since the lender has that assurance from the government, they are able to comfortably offer a lower interest rate to the borrower.

Not all government backed loans are the same. There are three specific types of loans that the government will assure payment on: The FHA loan, which is backed by the Federal Housing Administration, the VA loan which falls on the U.S Department of Veteran Affairs, and finally, an RD loan which is backed by the Rural Development Housing Division.

FHA Loans

The kind of loan that you have probably heard most about is the FHA loan. It is very popular among first time home buyers because typically these loans don't require a large down payment and also are tailored for those who do not have excellent credit. In fact, many times the FHA loan will allow the borrower to qualify for the loan with as little as 3.5% down. Although mortgage insurance is required for FHA loans, they are much more forgiving of things like a low credit score and even bankruptcy or foreclosure.

VA Loans

In order to qualify for a VA loan, you must have been in active military service at some time. There are a lot of complicated and intricate restrictions on these loans, but if you qualify, there are some great benefits, such as zero money down and no mortgage insurance! Most borrowers will, however, have to pay higher closing costs that include a funding fee. The good news is that these costs can usually be incorporated into the loan amount. These loans tend to be lenient with the requirements for credit history and may even tolerate a bankruptcy that is over one year old providing that good credit habits have been established since then. Since there are many guidelines it is imperative that you choose a lender who is familiar with these kinds of loans.

RD Loans

The Rural Development loan is designed specifically for those with a lower income and who live in a rural area. They can be used not only for buying a home, but also for building or renovating a home. There are some guidelines that have to be met in order to qualify for this type of loan as well. While there is no down payment required for this type of loan, the borrower must not have an income that exceeds more than 115% of the median for the area and also, must choose a home that is "modest in size, design, and cost".

Refinancing

These government backed loans are not just for home buyers, they are also available to those who simply want to lower their interest rate by refinancing. If you already have an FHA loan, then you might benefit from an FHA streamlined loan, which is one option for refinancing your home. Even if your current mortgage is not backed by the government, the FHA and VA have programs that will allow you to refinance your home with them. Whether you are looking for a Dallas Mortgage, Houston Mortgage, or San Francisco Mortgage, you can do your mortgage refinancing here at Lender411. The Rural Housing loan program on the other hand, will only refinance a loan that was previously with them.

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