Special Loans for Everyone
Here's one instance where "your tax dollars at work" really will mean something to you. Thanks to several programs sponsored by Uncle Sam, it's possible for almost everyone to own a piece of the American Dream. The programs are so successful that almost 60% of all families in America now own their own homes.
The Federal Housing Administration (FHA) is a federal agency within the U.S. Department of Housing and Urban Development (HUD). FHA's primary objective is to assist in providing housing opportunities for low- to moderate-income families. FHA has both single family (one to four units) and multifamily (five or more units) mortgage lending programs. The agency does not generally provide the funds for the mortgages, but rather insures home mortgage loans made by private industry lenders such as mortgage bankers, savings and loans, and banks.
Homeowners with FHA loans usually only have to make a small down payment equal to about 3% of the value of the home. They also enjoy a lower interest rate, between 0.5% and 1% below the interest rates on other mortgages. The down side is that they do indeed have to purchase private mortgage insurance, or -- as it's called under these loans -- mortgage insurance premium (MIP).
The more you know about loan programs, the more you will realize how little red tape there is in getting a VA (Veterans Administration) loan. These loans are often made without any down payment at all, and frequently offer lower interest rates than ordinarily available. Aside from the veteran's certificate of eligibility and the VA-assigned appraisal, the application process is not much different from any other type of mortgage loan. What's more, if the lender is approved for automatic processing, as more and more lenders are, a buyer's loan can be processed and closed by the lender without waiting for the VA's approval of the credit application.
Rural Home Buyers
Special loans also exist for people choosing to locate in a rural area. These loans are given to encourage economic development in depressed regions. The specifics of the program are similar to the FHA loan program but may not be as stringent with the income qualifications.
You'd be surprised, though, at what's considered a "depressed region." You can sometimes find these loans available in very nice areas that for one reason or another have managed to qualify. Be sure to ask if such a program exists in your area.
No matter what kind of loan you end up getting, though, there will be tax implications -- generally positive ones.