FHA Mortgage Program

An FHA Mortgage is a loan insured by the Federal Housing Authority which is part of the U.S. Department of Housing and Urban Development (HUD).

FHA loans used to have lower down-payment requirements and were easier to qualify for than conventional loans. In recent years, however Fannie Mae and Freddie Mac have introduced low down-payment programs like the Community Home Buyer program.

FHA loan limits vary geographically.

Besides the 30-year fixed and adjustable loans, the FHA Mortgage has some very unique programs such as the 203K loan (for rehabilitation of run-down properties) and the Title 1 loan (for home improvement) which requires no equity.

VA Mortgage Program

A lender, such as a mortgage company, savings and loan or bank, can originate the VA Mortgage Loan. VA's guaranty on the loan protects the lender against loss if the payments are not made, and is intended to encourage lenders to offer veterans loans with more favorable terms.

The amount of guaranty on the mortgage depends on the loan amount and whether the veteran used some entitlement previously. With the current maximum guaranty, a veteran who hasn't previously used the benefit may be able to obtain a VA Mortgage loan up to the limit amount currently set by the government depending on the borrower's income level and the appraised value of the property.

The local VA office can provide more details on guaranty and entitlement amounts.

• Before arranging for a new mortgage to finance a home purchase, veterans should consider some of the advantages of VA home loans.
• Most important consideration, no down payment is required in most cases.
• Loan maximum may be up to 100 percent of the VA-established reasonable value of the property. Due to secondary market requirements, however, loans generally may not exceed the limit amount currently set by the government.
• No monthly mortgage insurance premium to pay.
• Limitation on buyer's closing costs.
• An appraisal, which informs the buyer of property value.
• Thirty-year loans with a choice of repayment plans.

Requirements For Loan Approval

To obtain a VA Mortgage, the law requires that:

• The applicant must be an eligible veteran who has available entitlement.
• The loan must be for an eligible purpose.
• The veteran must occupy or intend to occupy the property as a home within a reasonable period of time after closing the loan.
• The veteran must be a satisfactory credit risk.
• The income of the veteran and spouse, if any, must be shown to be stable and sufficient to meet the mortgage payments, cover the costs of owning a home, take care of other obligations and expenses, and have enough left over for family support.

Five Easy Steps To A VA Loan

1. Apply for a Certificate of Eligibility. A veteran who doesn't have a certificate can obtain one easily by making application on VA Form 26-1880.
2. Decide on a home that you want to buy and sign a purchase agreement.
3. Order an appraisal from VA. (Usually this is done by the VA lender.)
4. Apply to a mortgage lender for the loan. While the appraisal is being done, the lender can be gathering credit and income information.
5. Close your new VA Mortgage Loan and you move in.