Buying and moving into a new home is one of life’s great experiences, especially if you’re buying your first home. From getting that pre-approval to the “yes!” response on an offer to closing and moving in, every step is exciting. And while the process is engaging and fun, it’s important to prepare for moving day […]
What is a government-backed mortgage?
When starting to research the best mortgage loan for your needs, it’s important to understand your options. Simply put, two main types of loans you will come across are government-backed and conventional. Each offers their own benefits to borrowers. Here are a few tips so you can make the best decision for your home financing needs.
How do government-backed loans work?
A government-backed loan is a loan insured by the federal government and works with approved lenders, like Smartmortgage.com. This reduces the risk on the lender and often results in lower rates and low-to-no down payment options. The three main federal agencies offering government mortgage loans are:
- Federal Housing Association (FHA): FHA loans have flexible qualification requirements including lower credit scores and lower down payments. This makes them popular for first-time homebuyers, but anyone who is qualified can receive funding.
- Department of Veteran Affairs (VA): VA loans are reserved for current military personnel, veterans, and surviving spouses. There are many benefits for those eligible such as the ability to borrow up to 100% of the home’s value, no down payment options and other reduced fees.
- U.S. Department of Agriculture (USDA): USDA loans are offered for those looking for a home in an eligible rural area. Known for the zero down payment options and better than average interest rates, USDA loans are for eligible first-time as well as repeat homebuyers.
How are conventional loans different?
Different than government loans, conventional loans are insured by the lender. They offer both fixed and adjustable-rate options, competitive rates, and a large selection of loan options. There are clearly defined guidelines for eligibility like requiring good credit, down payment requirements, and other funding criteria set by Federal Housing Finance Agency (FHFA). For anyone wanting more information on these guidelines, contact us at Smartmortgage.com to help you determine which loan is best for you.
Not all lenders offer each type of loan, so it’s essential to do your research if you’re looking for a specific type of loan. Here at SmartMortgage.com, our experienced agents will guide you to the best mortgage loan for you. Contact us today for more information.