Can You Get a Government Loan to Buy a House?

The government offers many schemes to help those in need to own their own home. While these schemes may not be in the form of direct loans, they are certainly helpful if the borrower qualifies. They can be accessed through the official federal government website. The US Federal Housing Administration (FHA) also finances new homebuyers, first or second homebuyers and those with low incomes.

FHA offer loans for housing that can be advantageous to the borrower who has a loan from another lender. If the terms of the loan were difficult to meet, re-financing would be a viable alternative. Loans that were acceptable a decade ago are now no longer attractive due to the change in interest rates and other things. Refinancing with an FHA loan could save you a great deal of money, especially if you’ve years to go on your present loan.

FHA loans traditionally have a lower interest rate than those offered by banks and other lending institutions. Because it is a government program, you can have peace of mind that there are no scams operating within the ranks. Whether you would save anything by refinancing depends on the terms of your present loan. FHA may not suit everyone, but it’s certainly worth looking into, especially if your needs have changed. For instance, you may now need to free up some cash for other areas such as education.

While we speak of FHA loans, the term is something of a misnomer in that the FHA does not actually make the loans, but it insures the loans that are made by private lenders. To get this assistance, you need first to contact a number of lenders and ask if they originate FHA loans.

Having the insurance paid by the FHA gives the lender confidence to make the loan that he might otherwise not make. It lowers the costs of low and middle-income earners, allowing them to access a loan for which they might not otherwise qualify.

FHA mortgage insurance does not factor in the borrower’s credit score like more conventional loans do. With a conventional loan, the amount of insurance required soars as the credit score plummets; with FHA it stays the same. This can save the borrower thousands of dollars per year on his loan.

Other initiatives funded by the federal government include grants via such schemes as the American Dream Down Payment Initiative.

This is the third post of our series on getting the best home mortgage.