Pay Little to No Money Down With These Government Loans

When you think about the initial expenses that come with home ownership, you’ll find the process to be quite stressful. Especially with most traditional home loans asking for 20% down payment. Not to mention the other various costs associated with purchasing a property.

Having to raise sizeable sums of money up front for these initial costs has been one huge barrier to homeownership for many. This is especially true for middle to low income earners.

Thankfully, the Federal Housing Administration (FHA), the United States Department of Agriculture (USDA), and the United States Department of Veterans Affairs (VA) all offer government-guaranteed home loans. All three loans minimize or eliminate most of the upfront costs associated with homeownership.

Federal Housing Administration (FHA) Loans

FHA-issued government loans offer some of the most relaxed eligibility conditions out of any home loans available. This has made them ideal for first-time homebuyers. They also have several major advantages, including:

  • A significantly low down payment of 3.5%.
  • A credit score of at least 580, while some lenders may accept a score as low as 500 in exchange for a larger down payment.
  • Competitive monthly mortgage costs.
  • You save money on closing costs.

FHA applicants can use gift money or an FHA assistance grant to make their down payment. FHA loans are assumable. This means that if a homeowner sells their home, the new owner can pick up where the previous one left off with their payments.

Applicants who have had financial troubles in the past are also eligible for these home loans. Those who have filed for a Chapter 7 bankruptcy will be eligible under the stipulation that it has been two years since their bankruptcy was discharged. Those who have filed for Chapter 13 bankruptcy may also qualify for the loan. All they need is one year of on-time payments and court approval.

The loan can purchase single-family residences and multi-family dwellings of up to a fourplex. In addition, these loans can buy FHA-approved condos, manufactured homes, townhomes and mobile homes that meet the FHA’s requirements.

U.S. Department of Agriculture (USDA) Loans 

USDA loans were created for low-income families that can’t afford a home using other government loans. They are only meant for homes in designated rural areas. The applicant must have a household income that is at or below the county’s low-income level to be eligible for these home loans.

These loans also stipulate that the property be a modest single-family home with no additional features, such as an in-ground pool. Property cannot be used for any commercial purposes. USDA loan limitations are established at $91,900 on average. However, this amount varies based upon the county’s living standards.

Once the applicant’s eligibility is confirmed, they will take advantage of USDA loan benefits, such as zero down payment, cheap mortgage insurance payments and low interest rates.

Department of Veterans Affairs (VA) Home Loan  

The VA offers some of the greatest home loan options available. However, they are only for qualifying military spouses, veterans, and active duty service members. All other VA eligibility requirements must also be met, including military service, property, income, and credit score requirements.

Once an applicant qualifies, they will have access to some of the best features available in any home loan. A $0 down payment, cheap monthly mortgage payments, and low monthly interest rates are just a few of the benefits. These mortgages are also available for single-family homes, multi-family property with up to four units, mobile homes, and VA-approved condominiums.

First-time VA mortgage applicants will no longer be subject to county loan limits as of January 1, 2020. The only constraint for them now is their financial capability. Applicants with over one ongoing home loan, however, are still subject to county limits, which in most counties are set at $647,200.

Through government-guaranteed home loans, becoming a homeowner is easier and less costly. You save a lot of money upfront and get significant incentives moving forward. They also have low eligibility requirements, making them easily accessible to many.

Lenders are also more inclined to relax their eligibility rules because they are protected from financial loss by the government.

Phil Georgiades is the CLS for, a brokerage specializing in first-time buyer home loans. He has been a practicing real estate professional for more than 22 years. To learn more about programs available to you or apply for a home loan, call us at (877) 432-5626.