Popular Programs

Here's a brief summary of some of the more popular programs for mortgages:

Department of Veterans Affairs (VA) mortgages
Backed, but not issued, by the U.S. government, VA loans help veterans and their spouses buy homes. In most cases, no Down Payment is required (except for relatively expensive properties) and other benefits may apply. The government says it is more understanding than conventional lenders toward borrowers who Default.

Federal Housing Administration (FHA) mortgages
Administered by the Department of Housing and Urban Development (HUD), FHA loans are backed, but not issued, by the U.S. government and feature easier Credit Qualification, down payment and Underwriting standards than standard loans. HUD collects Mortgage insurance payments from borrowers and guarantees lenders full payment if those borrowers default.

Rural Housing Service mortgages
The Department of Agriculture provides low Interest, no down payment loans to farmers and other qualified borrowers with low to moderate incomes buying property in rural areas or small towns who are unable to obtain loans elsewhere.

State and local government-backed mortgages
Many state and local housing agencies sponsor programs to help first time home buyers who meet specific income guidelines or who are willing to buy homes in certain locations. Loans feature low down payment requirements, subsidized interest rates, help with Closing costs and other benefits.

Down payment assistance programs
The late 1990’s brought on a new wrinkle in FHA insured loans. The FHA required buyers to make down payments of at least 3 percent, but also allowed nonprofit agencies to bestow gifts of down payment money to buyers. Nonprofit agencies sprung up to do just that; not exactly what the FHA intended, but the federal government has passed on opportunities to stamp out down payment assistance programs.

Down Payment Assistance

Down payment assistance requires the cooperation of the seller, buyer and Lender. The seller agrees to donate money to the down payment assistance program (usually equivalent to a 3 percent down payment). At closing, the program gives the money to the seller out of the program's pool of money. Immediately afterward, the seller gives the program a contribution equal to the down payment plus a Processing fee. This satisfies the FHA's regulation that prohibits the seller from giving the down payment to the buyer.

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