Since the disaster of the sub-prime home-loan crisis that started in 2007 and really has not completely resolved itself in 2014, it has been just a little harder to get a government-backed mortgage. Fortunately it has not been impossibly difficult, just a few more hoops and altered terms.
When borrowers take out FHA and VA mortgages it does not mean that the agencies are actually funding their mortgage. It just means that they are providing a government guarantee to back up loans that conform to their standards of what is needed and sensible.
Advantage To Veterans In FHA and VA Mortgages
If you are a veteran, i.e., anyone serving in or honorably discharged from the of the branches of United States military a Veterans Administration (VA) home loan could be a good way to get a home of your own for no money down. It has to be offered at the appraised value or less and you need to have the seller agree to pay the closing fees. Assuming a go on all of this and you can have about the easiest no down payment real estate deal out there. Of course that doesn’t take into account anything that you went through while you were deployed by the service you served in.
You still need to qualify for FHA and VA mortgages on similar terms of income and credit history. With some exceptions the VA program covers loans up to $144,000 for both purchases and refinancing. There are other terms that make it quite a generous deal: VA loans are assumable by qualifying veterans, the vet doesn’t have to be a first time buyer and you can use is it repeatedly without penalty. Also, a private mortgage insurance policy is not required, making it a much preferable option when compared to FHA.
On the down side you can end up with a loan that is greater than 100 percent of your home value due to VA funding fees and, as anyone who has ever attempted to get anything out of the Veterans Administration can tell you there is paperwork involved, which can be burdensome.
Down Payments With FHA Home Loans Are Still Pretty Low
With the financial crisis in the rear view mirror the Federal Housing Administration (FHA) has made some changes to their popular FHA loan program. The main changes are in raising the down payment requirement from three percent up to 3.5 percent and adding extra flexibility to refinance for homeowners who are under water.
One drawback of the FHA home loan program is the cost of private mortgage insurance that is required on the loan, both as a closing cost and as a monthly premium, on top of mortgage payments of principal and interest. For this reason, an FHA loan is likely to be the last resort for borrowers.
There are options for most homebuyers depending on needs, terms and ability to pay. The access to homeownership that FHA and VA mortgages have given to the American public is one of the great features of the US residential real estate market. Although some borrowers will qualify for better terms with conventional loans, for everyone else need not give up on the dream of homeownership just because they need a little extra help. FHA and VA mortgages are there to make it happen.