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Government Loans

Government loans are guaranteed loans by federal agencies which enables lenders to lend money with minimal risk. However, the government doesn't lend the money, but guarantees repayment to the lender and insures losses that may be incurred if a loan goes into default and subsequent foreclosure. Government loans include: Federal Housing Administration (FHA) loans and Veterans Administration (VA) loans.


The main advantages of financing using VA loans are that the VA allows veterans to finance 100% of their home's value, therefore not requiring a down payment, and that there is not any monthly mortgage insurance. VA loans require payment of a funding fee to the VA. Please note that the VA has the final say on who is exempt and that all veterans must qualify and are not automatically eligible for the program.


The advantages of financing using FHA loans are that they are easier to qualify for and allow a borrower to finance at a higher loan-to-value than non-government loans. Borrowers using this program have financed approximately 96.5% of the home's value for new purchases, 97.75% for non-cash out refinances and 85% for cash out refinances.

FHA loans are favorable to those borrowers who are first-time buyers, prefer a smaller down payment, have a short credit history, and for those who are having trouble qualifying for a Conforming Loan.