If you are looking to purchase a home in the U.S., you may be worried that the housing boom will prevent you from finding your dream home within your budget.
However, many home loan incentives benefit an array of Americans, such as veterans, first-time homeowners, Native Americans, and low-income households. Through the federal government, there are many home loan programs available, with most offering small down payments or low-interest rates.
If you are worried about the high costs of purchasing a home, you may meet the requirements for one of the below loan programs.
The Department of Veterans Affairs (VA) provides housing incentives for veterans, active military personnel, and National Guard members and reservists. When a person signs up to protect his or her country, they often pass up education and business opportunities that can hinder them when they become civilians again.
Therefore, the VA offers veterans and service members who qualify with mortgage loans that include no down payment. With these incentives, it makes it possible for a veteran or active-duty military personnel to purchase a home for his or her family.
The first step to determine eligibility for a VA home loan is to apply for a Certificate of Eligibility (COE). The VA does not only protect the future of veterans and service members but also surviving spouses and disabled veterans.
Through the VA, surviving spouses may be eligible for a claim loan and receive help from a financial counselor or loan technician with managing their loan. Also, the VA assists disabled veterans with programs like the Veterans’ Mortgage Life Insurance (VMLI), which helps service members and veterans pay off a home mortgage in the event of their death.
With these programs, homeownership is accessible to an array of veterans and service members.
An FHA loan is a mortgage that is issued by the Federal Housing Administration (FHA). It is a type of loan that is extremely popular as it helps millions of Americans purchase homes across the country. Essentially, an FHA loan allows homeowners to buy a house with a home mortgage without needing to put down a large down payment.
A home mortgage is when a creditor or bank gives the funds to a homeowner to buy a house. In exchange for the mortgage funds, the lender charges a set interest rate each month in addition to the monthly mortgage rate.
Although there are many types of loans available in the U.S., the most common home loans are FHA loans and conventional mortgages. Therefore, you may be wondering what the benefits of choosing an FHA loan are.
First, the most desirable feature of an FHA mortgage is that the down payment requirements are lower than a conventional loan. A down payment is a percentage of the home cost that you must pay before the home loan takes effect.
Typically, conventional loans require borrowers to put down a down payment of 20 percent of the price of the home. However, most Americans do not have that amount of funds available to them, which is why FHA loans that only require down payments between 3.5 and 10 percent is desirable to borrowers.
With an FHA loan, borrowers can significantly reduce the financial obligation and pressures of purchasing a home.
If you are a first-time homeowner and think that you will never be able to buy a house, the FHA may be able to help. The FHA offers home loans to applicants with low-to-moderate incomes by drastically reducing the down payment to an affordable percentage of the price of the home.
By doing so, it protects lenders against a first-time homeowner defaulting on his or her loan. Typically, applicants with a credit score as low as 500 are eligible for a loan with a down payment of 10 percent. For applicants with a credit score that is higher than 580, they can receive an FHA loan with a down payment of 3.5 percent.
If you are an American Indian, a member of an Alaskan Native family, an Alaska village, or tribe or tribal designed housing entity, you may qualify for a home mortgage program through the Indian Home Loan Guarantee Program (Section 184).
However, there are also eligible areas that go beyond tribal trust lands, and some states accept Section 184 loans. Therefore, if you believe you qualify for the loan program, you should apply.
If you are eligible for a Section 184 loan, you can receive a loan greater than $50,000 at 2.25 percent interest, or you can get a loan less than $50,000 at 1.25 percent. However, when you receive this loan, you must use the funds to construct a new home or buy an existing home, purchase and rebuild a home, or refinance a home.
If you are a member of a low-income family, you may meet the requirements to buy a home. The Public Housing Ownership (Section 32) program offers public housing agencies (PHAs) the opportunity to sell housing units to families that fit the income requirements. To be eligible, you cannot exceed 80 percent of the family income in your area.
Through this government housing assistance program, both the buyer and the PHA benefit from the sale of the housing unit. Section 32 gives buyers access to affordable homeownership options, while the PHA has the opportunity to keep and reuse the profit from the sales of these units to sell public housing rental units to eligible homebuyers.
Also, it can offer funds to public housing residents or other low-income families in the forms of down payment or closing cost assistance. You should know that if your family currently lives in a PHA that is part of the Section 32 program, the PHA must offer the house to you.
If you decline the offer, the PHA must give you a 90-day notice before the date of the sale of the housing unit. Also, the PHA must help you find a new family home by providing counseling, relocation expenses, and replacement housing options that are comparable in price to the housing unit that you are leaving.