Government loan programs
USDA or Rural Development Loans
A USDA Mortgage Loan is a true no money down home loan that can be used to purchase an existing home. The loan is offered by a third party lender and USDA is the government agency that insures the loan. If a homeowner defaults on the mortgage USDA pays back a portion of the money lost to the lender. This is how they can offer 100% financing with low rates and fixed terms, as the lender is insured to receive money from USDA if the buyer defaults.
Who is Eligible?
You do not need to be a first time homebuyer to qualify for the loan. The USDA Loan does have a few requirements that other loans do not have.
You must be purchasing a home in an eligible area. Although the home loan is a rural loan, many cities qualify that you wouldn’t necessarily view as rural. We would be happy to check the eligibility of a certain home you have in mind.
The other main requirement is your income. USDA has income limits that you must not exceed for the program in order to qualify. These are household limits, not applicant limits. This means that anyone living in your household with income will need to be included when determining your household income for eligibility, regardless if they are on the loan or not. The income limits are different for every county and do depend on family size and other family circumstances. It is best to contact one of our experienced loan officers to determine if your household will qualify.
How Can I Qualify?
Qualification for the USDA Loan is lenient compared to the other government loans. If you have an average credit score and sensible credit history the process can be easy and quick. In some cases, less than perfect credit can still be approved with the correct explanations and current payment histories. The best way to know if you will qualify is to fill out our easy, secure online application and one of our loan officers will contact you immediately to discuss your options.
An FHA loan is insured by the Federal Housing Administration, a federal agency within the U.S. Department of Housing and Urban Development (HUD). The FHA does not loan money to borrowers, rather, it provides lenders protection through mortgage insurance (MIP) in case the borrower defaults on his or her loan obligations. Available to all buyers, FHA loan programs are designed to help creditworthy low-income and moderate-income families who do not meet requirements for conventional loans.
FHA loan programs are particularly beneficial to those buyers with less available cash. The rates on FHA loans are generally market rates, while down payment requirements are lower than for conventional loans.
Some of the other benefits of FHA financing:
- Only a 3.5 percent down payment is required.
- Some closing costs can be financed.
- Lower monthly mortgage insurance premiums and, under certain conditions, automatic cancellation of the premium.
- More flexible underwriting criteria than conventional loans
- FHA limits the amount lenders can charge for some closing cost fees (e.g. the origination fee can be no more than 1% of mortgage).
- Loans are assumable to qualified buyers.
VA guaranteed loans are made by lenders and guaranteed by the U.S. Department of Veteran Affairs (VA) to eligible veterans for the purchase of a home. The guaranty means the lender is protected against loss if you fail to repay the loan. In most cases, no down payment is required on a VA guaranteed loan and the borrower usually receives a lower interest rate than is ordinarily available with other loans.
Other benefits of a VA loan include:
- Negotiable interest rates.
- Closing costs are comparable and sometimes lower - than other financing types.
- No private mortgage insurance requirement.
- Right to prepay loan without penalties
- The Mortgage can be taken over (or assumed) by the buyer when a home is sold.
- Counselling and assistance available to veteran borrowers having financial difficulty or facing default on their loan.
Although mortgage insurance is not required, the VA charges a funding fee to issue a guarantee to a lender against borrower default on a mortgage. The fee may be paid in cash by the buyer or seller, or it may be financed in the loan amount.
A VA loan can be used to buy a home, build a home and even improve a home with energy-saving features such as solar or heating/cooling systems, water heaters, insulation, weather-stripping/caulking, storm windows/doors or other energy efficient improvements approved by the lender and VA.
Veterans can apply for a VA loan with any mortgage lender that participates in the VA home loan program. A Certificate of Eligibility from the VA must be presented to the lender to qualify for the loan.