Getting to Know Government Loans

December 15, 2021

While it’s always important for buyers to understand the loan options available to them when purchasing a home, in today’s hot real estate market it could make all the difference – especially for first-time homebuyers or others who may have trouble qualifying for conventional mortgages.

With that in mind, we are taking a closer look at the government-backed loans available through BayFirst and answering some common questions:

• What is a government loan? Government loans are insured by the U.S. federal government, meaning the government protects the lender against loss if a borrower does not pay their loan. These loans were created to help all types of homebuyers realize the dream of homeownership.

 
When compared to conventional mortgages (which are made available through private lenders and not backed by the government) government loans are often more affordable, typically come with lower interest rates and are easier to qualify for.  Borrowers will pay the government loan back the same way they would a conventional loan: in monthly payments with interest.
 

• What kinds of government backed residential loans are there? When it comes to government backed residential mortgages, some of the most popular include the following, which are all available through BayFirst:

FHA Loans: Insured by the Federal Housing Administration, these loans involve down payments of as little as 3.50% and advantageous credit requirements making them a great option for first-time buyers and those with hardships in their financial history.  It is important to note, however, that borrowers using an FHA loan will be required to pay an upfront mortgage insurance, and monthly mortgage insurance payments going forward.

VA Loans: Backed by the U.S. Department of Veterans Affairs, VA loans are available to veterans, current military members and qualifying surviving spouses with a valid certificate of eligibility (COE), proving military status to qualify for the loan.  VA loans offer many advantages over conventional loans, including no down payment options, interest rates that are typically lower and more lenient underwriting requirements.  VA loans do not require monthly mortgage insurance.

USDA Loans: USDA loans are backed by the U.S. Department of Agriculture and can help qualified buyers purchase a home in a designated suburban or rural area. Buyers can check their potential home’s eligibility on the USDA website. USDA loans do not require a down payment, offer favorable underwriting terms, and most lenders will require that borrowers have a credit score of at least 620 to qualify.

While researching government loans and knowing how they differ from a conventional loan is an important step in the homebuying journey, it’s always smart to also speak to an expert who can help you understand all mortgage options and requirements before choosing a loan. If you are ready to do so, a mortgage expert from BayFirst is standing by. Just click here, fill out the form below or stop in to get started! We are ready to get you moving.