If you’re preparing to buy a home – especially your first – you may be surprised at the seemingly endless government loan programs and financing options which may be available to you.
The lingo pops up in advertising, articles (and blogs!) and conversations with real estate professionals.
While the plethora of acronyms and names such as HUD, FHA, VA, USDA, HUD, Fannie Mae and Freddie Mac may seem confusing, it’s important to learn about each of them as they may provide you with attractive mortgage options..
Here are some you should know about:
The Federal Housing Administration (FHA) is a department within the U.S. Department of Housing and Urban Development (HUD) that helps first-time buyers, buyers with less than stellar credit ratings, those with small down payments and others who may face challenges in securing a mortgage.
The FHA does not make loans to buyers. Instead, it provides mortgage insurance, essentially backing loans, to buyers. The FHA reviews and approves lenders, then insures loans to buyers who may be a higher risk to lenders. The FHA backing lessens the risk to lenders and enables many buyers to purchase a home.
Federal Housing Administration-backed loans can be used to purchase single-family homes, multi-family residences, manufactured houses and other homes.
The U.S. Department of Veterans Affairs (VA) provides partial home loan guarantees or backing for U.S. military veterans, active service members and surviving spouses of deceased service members.
Also, similar to the FHA, the Veterans Administration reviews and approves lenders, then backs a significant portion of loans made by those providers. The support provided is a significant advantage for veterans, active military members and spouses, as these loans often do not require adown payment. They also feature lower interest rates, limited closing fees and no need for private mortgage insurance. Access to VA loans is a lifetime benefit, which can be used more than once.
The United States Department of Agriculture (USDA) is involved in much more than agriculture.
The USDA also provides mortgage backing for homes to be purchased or built in selected areas of the country. These areas – designated by ZIP code – are located in rural areas, which are often populated by farmers, ranchers and others working in agriculture.
As with FDA and VA mortgages, the USDA does not fund home loans but instead guarantees the loans. It also reviews and approves the lenders who actually fund the loans.
Borrowers who access USDA-backed home loans benefit from lower interest rates, more flexible credit eligibility, and inexpensive private mortgage insurance. USDA financing may also be used to repair or upgrade eligible homes.
The Federal National Mortgage Association, commonly known as “Fannie Mae,” does not originate loans or actually lend to homebuyers. Instead, Fannie Mae purchases loans from banks and mortgage companies, who then use the Fannie Mae funds to provide financing for other buyers.
Fannie Mae loans may be used to purchase single- or multi-family homes, and generally feature lower interest rates for homeowners. In addition, Fannie Mae offers assistance in the form of programs for homeowners at risk of losing their homes due to financial difficulties or disasters.
The Federal Home Loan Mortgage Corporation, commonly know as “Freddie Mac,” also purchases mortgages from lenders. The money from these transactions is then used by lenders to provide financing for more buyers. Unlike Fannie Mae, Freddie Mac then assembles collections (referred to as “portfolios’) of the mortgages it has purchased and then sells those portfolios to investors. Freddie Mac benefits homebuyers by keeping capital flowing into the housing market.
The loan officers at SmartMortgage work with the full range of federal mortgage-related programs every day, and have exceptional experience in supporting countless buyers seeking conventional and government-backed financing.
Regardless of your situation, our loan officers will support you from application to closing and are ready to help you. Contact us today and get the professional advice and service you need.
Short-term real estate rentals have gained popularity in recent years and seem likely to maintain their appeal. Many travelers and tourists now seek out these properties as a cost-effective and interesting way to secure accommodations for a few days or weeks. Owning a short-term rental property as an investment is in many ways similar to […]
Putting a home into a trust may seem like an option reserved for older homeowners who have paid off their mortgage and have accumulated an estate, including assets such as a home, motor vehicles, various investments, boats, rental properties, furniture and even a vacation home. However, having a home that’s owned outright is not necessary […]
The start of a new year is often seen as the time to make major changes in life. While many people resolve to start hitting the gym, losing weight, reading more, or making a career change, others may decide to buy a new home in the coming months. That’s a great goal, one that can […]
