Unit 3 : Lesson 1: What you should know about mortgage loans

Looking further

Government-insured loans

Finding the money for a down payment and closing costs can make buying a house seem
out of reach for many low- and moderate-income persons. But there are a number of programs available to help first-time home buyers. Here are a few of the most common ones.

Federal Housing Administration (FHA) loans

In 1934, the government set up a special agency, the Federal Housing Administration, to help people afford homes. The FHA program allows you to put just 3 percent down for the first $25,000 of your loan and to make a low down payment on the rest. You may also be able to finance the closing costs as part of the loan. Contact lenders or the U.S. Department of Housing and Urban Development for more information.

Department of Veterans Affairs (VA) loans

Started after World War II, the VA mortgage loan has allowed thousands of veterans and their families to buy homes. Today, this program lets qualified veterans buy a house with no down payment. Contact the Department of Veterans Affairs for more information.

Rural Housing Service (RHS) loans

The Rural Housing Service, a part of the U.S. Department of Agriculture, also offers low interest rate loans with no down payment to low- and moderate-income persons who live in rural areas. Contact your local Rural Housing Service office or a local lender.

State and local loan programs

Most states and many local areas also have a variety of special loan programs. Look in your phone book for your local housing and community development agency.

Special loan programs

Special loan programs often exist to help first-time buyers. With some of these programs, you may be able to accept a gift from a relative or borrow a portion of the money you will need for the down payment and closing costs from a local nonprofit organization or government agency.

With others, you may be able to get a grant or other funds that you will not have to repay and can use to cover some of these costs. If you don’t qualify for a mortgage based on traditional factors, you may want to find lenders who offer special mortgage loans like these.

Some special loans allow you to use a greater percentage of your income toward monthly housing expenses and will not require you to have two months of cash in reserve at closing. If you don’t have a traditional credit history, you can show you have a good credit history using your rent and utility receipts. Ask lenders in your area about these programs.

Previous Page | Next Page