Salem, NH Mortgage News

What is A Government Mortgage?

September 30th, 2016 1:41 PM by Michael Loffredo, CMC

Government mortgages refer to those programs that are backed or insured by our federal government. Some are partially insured, such as FHA, and some are fully guaranteed, like VA.

These government backings allow banks to make these loans to lesser qualified borrowers or lower down-payment buyers and therefore expand homeownership throughout the country.

Here is a sample of these programs:

VA- the VA loan is for military veterans and their spouses. There is no minimum down payment required so many vets can purchase homes with zero down. There is also no pmi but the VA requires an up-front funding fee of 1.5%- 3.3%, depending on the loan type. This up-front fee is financed so the veteran still does not have to pay it out in cash. These features make the VA the least expensive government mortgage program.

USDA- otherwise known as Rural Housing. This program also offers zero down but is only open to home buyers in certain rural areas that also meet the low to moderate income limits. Income limits vary by county so check this chart for your local area:  http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

USDA mortgages have a pmi-like monthly fee, but offer rates as low as VA and FHA.

FHA- the largest government program and is open to all borrowers in all areas regardless of income. FHA has the most tolerance for lower credit scores and allows higher debt-to-income ratios. These loans do require monthly mortgage insurance (mi) and an up-front mi portion that is financed on top of the beginning loan amount. FHA loans have a minimum down payment of 3.5%. 

Call Omni Mortgage at (603)893-6616 today for more details!