History
-
The federal government began helping Americans buy homes during the 1930s. Congress created the Federal Housing Administration in 1934, at a time when only four out of 10 households lived in their own home and mortgages were paid back in three to five years. More programs and agencies have been added to help with home buying since then.
Function
-
The majority of home buyers receive government help in the form of mortgage insurance. Mortgage insurance from the FHA or the Department of Veterans Affairs pays lenders if a buyer defaults. Because the lender has less risk, buyers can get by with smaller down payments and lower interest rates. With FHA insurance, a home buyer with good credit can make a down payment as little as 3.5 percent; with a VA loan, buyers can avoid a down payment completely.
Direct Loans
-
The U.S. Department of Agriculture's 502 loan program offers loans directly from the government to home buyers living in rural areas. Recipients can use the loans to buy land, build a home or buy an already built house. A buyer must have income 80 percent or less of the median for her area in order to qualify for a 502 loan.
Other Programs
-
In addition to federal programs, many states have loan, grant or mortgage insurance programs available to help their residents buy homes. The U.S. Department of Housing and Urban Development maintains a web page of links to programs run by the various states.
Considerations
-
Every home buying program requires that you make enough money to qualify for the monthly payments on your mortgage. The VA and FHA, however, will allow a larger monthly payment -- including property taxes and insurance -- than conventional lenders. Most lenders want the combination of your housing payment and your other debts to total no more than 36 percent of your pre-tax monthly income, but with FHA insurance it can be as high as 41 percent.
No comments:
Post a Comment