Many homebuyers use housing assistance and subsidized loans because buying a house is a huge investment and a major life step. Mortgages are key in the housing market because very few people have enough cash to pay for a new home.
Conventional loans have always been a popular option, but there are now many types of mortgages for home buyers.
There are options for bad credit home loans, rural housing, accessible housing for people with disabilities and more. In addition to mortgages, there are a few government programs that give housing grants to help low-income families afford a home.
A few federal and local housing and housing assistance programs are available to help home buyers finance their purchase. Knowing how they work can make the process far less stressful in the long-run.
Before you sign a conventional or FHA home loan insured by the Federal Housing Administration (FHA), you need to know what kind of agreement you are getting into. Knowing the differences between the different mortgage options can help you choose the best loan for your housing needs. Some of these options are better for buying a house with bad credit, while others may just be for specific groups, such as veterans. A few of the most common types of home mortgage options are:
Mortgages from private lenders that are not backed by the government are called conventional loans. Although they are more of a risk than government-backed mortgages, conventional loans have benefits like:
Service members, veterans and surviving military spouses might be able to get housing assistance through loans from the Department of Veterans Affairs (VA). Depending on when, where and how long a veteran served, they may be eligible for a VA loan.
Any homebuyers who can get VA loans should do so because they have many benefits, like:
Note: Any service member who receives a dishonorable discharge will not be eligible for a VA loan.
FHA loans are mortgages that are backed by the government and insured by the Federal Housing Administration. These types of loans are popular for first-time homebuyers because you can have a lower credit score and down payment than conventional loans. However, FHA loans can only be used for a primary residence. That means you can’t use them for investment properties. Plus, all properties need to meet the HUD’s rules.
Some of the primary advantages of an FHA home loan include the following:
Although FHA loans are usually a good option, they can have higher interest rates on mortgages. If you use this type of loan you’ll also need mortgage insurance even if you give a big down payment.
A USDA home loan is a mortgage that is subsidized by the U.S. Department of Agriculture. These loans are meant to help people who live in rural parts of the country. These mortgages have some of the best terms in a housing loan, such as zero down payment and low mortgage interest rates.
Usually, these USDA loans are offered to low-income applicants, but the actual income requirements change from one place to another. In order to qualify, you need to meet USDA loan requirements including:
o Additional taxes.
Since home loans are a large risk, lenders look at your credit score to make sure you’re going to pay back your loan. Usually, the higher your credit score is, the better interest rates and loan terms you could receive. Certain loan types also have minimum credit scores:
The United States Department of Housing and Urban Development (HUD) has housing grants for Americans who want to purchase homes. However, these grants aren’t given directly to individuals. Instead, these funds are given to local governments and non-profit organizations that help their communities.
Note: No type of housing grant will cover 100 percent of the cost of a home.
Very low-income families (especially ones with elderly or disabled members) may be able to get housing assistance through Section 8. Now known as the Housing Choice Voucher Program, Section 8 was created to help families afford housing. One major benefit of Section 8 is that people who use it don’t need to live in government housing. Instead, the program lets them find their own housing, including townhouses, single-family homes and apartments, and use their housing vouchers to help afford the rent.
To get housing vouchers, you need to meet the Section 8 eligibility requirements, which include:
This includes your family’s income and assets. Generally, your family’s income will need to be below 50 percent of the median income in the county or metropolitan area.
Note: Since there’s limited funding for Section 8, even people who are eligible may not be able to enroll in the program.