Types of Government Loans
In general, government loans are intended to help homebuyers with certain qualifications purchase a home with a lower down payment, lower interest rate, and/or lower credit rating than is normally required by a conventional loan.
FHA Loan (Federal Housing Administration)
FHA loans aren’t actually provided by the Federal Housing Administration; rather, they are insured by them ‘in case of’ default. The FHA will cover the loss. Because of the power of this insurance, more borrowers can qualify for loans. FHA-backed loans afford borrowers:
- Lower down payments (as little as 3.5%, which can even be gifted to you)
- Seller contribution of up to 6% of the sales price allowed for closing costs
- Easier credit qualifying
The cost of the insurance is incorporated into the monthly mortgage payments.