Government-Issued Mortgages

The U.S. government oversees a variety of agencies involved in offering mortgages to the public. Mortgages that these government agencies issue are called government loans (all other types of mortgages are called conventional loans). The two most popular types of government loans are Federal Housing Authority (FHA) loans and Veterans Administration (VA) loans.

FHA loans: An FHA loan isn’t an actual loan. Instead, it serves as a an insurance policy on a conventional loan. Its purpose is to entice private lenders to lend to borrowers who would otherwise probably not be approved for a mortgage. To determine whether you meet the eligibility requirements for an FHA loan, see www.hud.gov/fha/loans.cfm.
VA loans: The government issues loans with 100% financing (no down payment required) to honorably discharged veterans, enlisted service personnel with 181 days of continuous active duty, spouses of veterans who died in service, and National Guard and Reserves personnel with six years of service. These loans enable veterans to get a mortgage without having to pay a down payment or private mortgage insurance. To check the eligibility requirements for a VA loan, see www.homeloans.va.gov.

Should You Get a Government Loan?

Government loans have many attractive features, including smaller down payment requirements and lower interest rates than conventional loans. On the other hand, they limit the total amount that you can borrow, require more time to process, and have strict eligibility requirements. Even if you do qualify for an FHA or VA loan, you might still consider a conventional loan because it’s generally faster and easier to deal with a private lender—i.e., any lender not affiliated with the government.

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Government-Issued Mortgages

Should You Get a Government Loan?