For many Americans, part of what it means to grow up is buying a home and raising a family. However, as the supply of homes continues to dwindle and the demand grows, it is much harder to buy a home. With increased prices and competition, buying your dream home is much more expensive today than it was for our parents and grandparents.
Currently, the median home price is $269,039 in the United States, which is too high for most Americans who do not have the $53,807 necessary to pay for the 20% down payment on the property. That high down payment is too much for most Americans whose median household income is $62,843.
Thankfully, three government mortgage loans can reduce or remove those initial costs that drive most potential buyers away. The Federal Housing Administration (FHA), the U.S. Department of Agriculture (USDA), and the Department of Veteran Affairs (VA) administer these home loans. However, each one of these loans has its benefits and requirements meant to target specific applicants.
FHA Home Loans
Home loans administered by the FHA are perfect for first time home buyers because they have come of the most lenient qualification requirements and some great benefits like:
- 3.5% down payment requirement.
- Lower monthly mortgage payments.
- Lower closing costs.
- A credit score of at least 580, although some lenders will accept even lower credit scores with a higher down payment.
These loans will even accept an applicant who has gone through some financial struggles in the past. Applicants who have a Chapter 7 bankruptcy in their record must have a two-year gap between their application date and discharge date. Chapter 13 bankruptcy recipients, on the other hand, must have court approval and a 12-month record of making payments on time.
One limitation that FHA loan borrowers have to work with is loan limits. These loan limits vary depending on the County. However, most of the United States County’s loan limits are $356,362 for a single-family home, $456,275 for a duplex, $551,500 for a triplex, and $685,400 for a fourplex.
USDA Home Loans
These home loans help lower-income families who wouldn’t qualify for a home loan otherwise to buy a home in an eligible rural community. To be eligible for this type of home loan, the applicant must be an American citizen and have a stable income either at or below the County’s low-income limit.
USDA home loans can only purchase a modest single-family home with no extra amenities and not used for any business purposes whatsoever. The house that is purchased must also be considered the applicant’s primary residence.
After meeting all eligibility requirements, the applicant will take advantage of some USDA home loans’ great benefits. These include:
- $0 down payment requirement.
- Competitive interest rates.
- A credit score of 640.
- Low mortgage insurance payments.
County loan limits also exist for USDA home loans, which for most counties are at $285,000 for a single-family home. Counties with a higher cost of living usually have higher loan limits.
VA Home Loans
Loans guaranteed by the VA are for Veterans, Active Duty Service Members, and eligible spouses. People who work in real estate considered these loans as the best Government guaranteed home loans available. These loans have helped more than 22 million Veterans become homeowners due to their outstanding benefits offered by VA home loans, which include:
- No down payment requirement.
- Lower interest rates.
- Lower monthly mortgage payments.
- No prepayment penalties.
- No mortgage insurance premiums.
In addition to these great benefits, as of January 1st, 2020, VA loans have completely removed loan limits for first-time buyers. As a result, borrowers can now purchase a home anywhere in the country without worrying about abiding by different county limits. The only limitation is how much the borrower can afford to borrow.
VA loan limits still exist for applicants with more than one active VA loan. However, those loan limits have increased to $548,250 in 2021 for most of the country, formerly at $510,400 in 2020 and $434,350 in 2019.
Therefore, if you’ve ever thought about living in the United States, it might benefit you to look into all the advantages offered by Government guaranteed home loans. As a result, it is possible to buy a home in the County for little to no money paid upfront.
Phil Georgiades is the CLS for VA Home Loan Centers, a brokerage specializing in VA home loans. He has been practicing real estate for 22 years. To learn more about programs available to you or apply for a VA mortgage loan, call us at (877) 432-5626.
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