government loans

Government Loans

The most common government loans are VA loans and FHA loans.

FHA-Insured Loans

The government created the Federal Houston Administration (FHA) to help first time home buyers and persons with little or no money down to assist them in purchasing a home. The FHA does not sell homes, they insure them. FHA loans allows the buyer to purchase a home with as little as 3 percent down, unlike a conventional loan which normally requires 20 or more percent down.

To qualify for a FHA loan the monthly house payment can be no more than 29 percent of the gross monthly income. The buyers debts cannot exceed 41 percent of the gross monthly income, including the mortgage payment. The qualifying process for FHA loans is more lenient than for conventional loans.

VA-Guaranteed Loans

VA loans are for Veterans and are often made without any downpayment at all, and frequently offer lower interests rates than ordinarily available with other kinds of loans.

In order to qualify for a VA loan the veteran must meet any of the time-in-service criteria. Two methods must be employed to determine a veteran's ability to qualify for a loan, debt-to -income ration and residual income. The combined total of monthly debt cannot exceed 41 percent of the veteran's gross monthly income, including the monthly house payment. Residual income is the amount of monthly income remaining after all debts are deducted.


Conventional Loans: These loans are not insured or guaranteed by the federal government.

Government loans: These types of loans consist of VA (for veterans) and FHA (first time home buyer, troubled credit, little or no money down) Loans

Fixed rate mortgage Loan (FRM): Interest rate and monthly mortgage payments remain the same for the duration of the loan.

Adjustable rate mortgages (ARM): Interest rate and monthly mortgage payments fluctuate over the period of the loan.

Balloon Loans: A short-term fixed-rate loan with low payments for a set number of years and one large final balloon payment of the remainder of the principal.