How to Save Money through a Government Loan Program in 2010

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If you are ready to become a homeowner, you’ve probably thought a lot about the house hunt. However, as you start your search to find the right home, don’t forget to look for the right loan as well. The financial strain of buying a home is often daunting, which is why there are government loan programs to help home buyers save money while making such a large purchase. One of these options may be for you:

VA Loans

If you or your spouse has served in the U.S. military, you may be eligible for a VA loan. Backed by the Department of Veterans Affairs, VA loans have flexible qualification measures and allow lenders to prepare mortgages for a greater number of borrowers. Eight out of ten VA loan borrowers would not have qualified for a conventional loan, so even if you’re worried about your credit history, this may still be an option for you. With the exception of a few parts of the country that have high costs of living, VA loans have a limit of $417,000 and must be used towards a primary residence (which does include farms). Their major benefits include:

No down payments
No required private mortgage insurance
Lower loan interest rates, as compared to conventional loans

There are service length requirements in order to qualify, but if you are a veteran interested in buying or renovating a home, there is no reason not to explore this great option.

FHA Loans

Similar to VA loans, it’s easier to qualify for an FHA loan than it is for a conventional loan (and you don’t have to be a veteran). Insured by the Federal Housing Association, FHA loans are meant to give more Americans the option of owning their own home, and they have no maximum income limit so anyone can apply for one. You can finance up to 96.5% of your purchase price while still enjoying a minimum down payment of 3.5%, making it easier to start seriously looking for a home sooner, even if your income level is low. While FHA loan amounts are generally smaller than conventional loans, so are their overall costs, thereby saving you money. Closing costs are regulated by the Department of Housing and Urban Development and thus kept low, and the mortgage insurance premium is only 1.5%. FHA loans were designed to help homebuyers save money, and it may be the option you’re looking for.

USDA Loans

Another great, money-saving option is a USDA loan. To qualify, you have to live in what is considered a rural area (generally a population of 10,000 or less, but sometimes up to 25,000). There are also income limits, so they are not an option for all in the same way FHA loans are. If you do qualify though, you are eligible for some great benefits. USDA loans require no down payments, even if you want to finance 100% of your purchase price. They also do not require mortgage insurance, another great measure to keep more money in your pocket.

With government loan programs such as these, you can be savvy about your home purchase and save money in ways that conventional loans do not allow for. Don’t let your new home take a bigger toll on your wallet than it has to!

The following guest post is by Robert Stretch. Robert works in marketing for VA Mortgage Center.com