Part of the American dream is to become a homeowner, especially for millennials, even more so the ones who are now in their 30’s. However, becoming a homeowner is not as simple as it might have been for their parents and grandparents before them. As more people enter the housing market, and the demand for homes increases, there begins to be a shortage of homes available.
This shortage of supply and demand increase leads to a rise in price for many of these homes, especially the ones located in bigger cities where most of the jobs are. Not only are home prices increasing, but for the millennial generation, which is the most indebted generation in recent history, becoming a homeowner seems like an unattainable dream.
Thankfully, Government Guaranteed home loans might be the solution that many millennials might have been waiting for. With their low eligibility requirements and little to no starting out of pocket expenses. In addition, these home loans are guaranteed by the United States Government, which protects lenders if the borrower ends up defaulting on their home loan. There are three different types of Government guaranteed home loans, Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA), and Department of Veteran Affairs (VA) Home Loans.
FHA Home Loans
These are the most widely used out of any home loan available because they have really lenient eligibility requirements and some great benefits. These include:
A low 3.5% down payment requirement can be covered by loan or through an FHA down payment assistance grant.
A credit score of at least 580, although some lenders are willing to go even lower, some even going as low as 500 with a higher down payment.
The program has a lower closing cost than conventional home loans.
Monthly mortgage payments are lower than with most conventional home loans.
The loan can also be taken out as either a 15-year or a 30-year fixed-rate mortgage.
These eligibility requirements and benefits make them the perfect home loan for people who might not have the best credit score or have a large amount of money saved. One limitation that FHA loans are subject to is loan limits, which tend to vary depending on the county where the property is located and its cost of living. These loans are also assumable, which means that if the original buyer decides to sell their property, a new borrower can assume the loan and continue making payments.
The more people learn about FHA loans, the more people seem to gravitate towards them as their first home loan for the purchase and refinancing of their home. Furthermore, these loans can be used on properties like single-family homes, multifamily complexes (duplex, triplex, and fourplex), and condos approved by the FHA.
USDA Home Loans
Homebuyers who might be considered low income and want to purchase a modest single-family home in a rural area can do so with a USDA home loan. These loans were created specifically to boost the economy of more rural areas by incentivizing people to move there. The USDA loan does this by offering applicants some great benefits as long as they meet the loan’s eligibility requirements. These benefits offered by the USDA include:
A $0 down payment requirement.
Lower monthly payments.
Competitive interest rates.
As far as eligibility is concerned, these loans are meant for lower-income families trying to buy a home in a rural community, with a history of making payments on time for the past 12 months. Additionally, for the applicant to qualify for the loan, they must have an income either at or below the county’s low-income limit.
For more information on USDA home loans or to check whether you qualify, click here.
VA Home Loans
Several advantages come from serving in the military, include learning skills like communication, teamwork, and integrity while also earning benefits like the GI Bill and VA home loans. The latter of which is considered by many as the best home loans available. These loans are meant for Active Duty Service Members, Veterans, and eligible spouses. Those who meet the VA’s eligibility requirements will get the opportunity to become homeowners with some great benefits.
Benefits that are offered by the VA include:
$0 down payment requirement.
Lower monthly mortgage payments.
No prepayment penalties.
No mortgage insurance premiums.
Lower interest rates.
Can finance the funding fee.
In addition to these great benefits, VA home loan borrowers after January 1st, 2020, can now purchase a property anywhere in the county without having to worry about abiding by county loan limits. This is because of the signing of the Bluewater Naby Veterans Act of 2019, which removed loan limits for first time VA home loan borrowers. As a result, the only limitation that applicants have to deal with is how much they can afford.
However, one thing to keep in mind is that the loan limit removal is only for first-time borrowers. Any borrower who has more than one active VA home loan is still required to adhere to the county loan limit, which at the start of this year increased to $510,400 in most of the country.
To learn more about VA home loans or to apply for a VA home loan, click here, or call us at (888) 573-4496.
Navigating the housing market waters is getting increasingly more challenging due to increasing costs and a decrease in the number of available homes. However, Government guaranteed home loans might be the liferaft that many potential new homeowners need to achieve homeownership dream. So what are you waiting for? Take a look at Government Home Loans and find the one that is right for you.
Phil Georgiades is the CLS for FedHome Loan Centers, a brokerage specializing in first-time buyer home loans. He has been a practicing real estate professional for the last 22 years.