Government-backed loans are loans subsidized by the government, which protects lenders against defaults on payments, thereby making it a lot easier for lenders to offer potential borrowers lower interest rates. The primary aim of government-backed home loans is to make home ownership affordable to lower income households and first-time buyers.
There are three main types of government-backed loans:
Typically for first-time home buyers, but anyone who qualifies can get lower credit requirements, low down payments, and great rates.
These types of loans are designed specifically for eligible veterans and their spouses. VA loans offer very low rates—and in many cases—no down payment at all.
These loans—at one time only intended just for farmers—now serve rural communities as a whole and guarantees as much as 100% percent on qualified mortgages.
Depending on which government-backed home loan is right for you, you’ll find that there are some very good benefits associated with them:
While only a small percentage of the population may be eligible for government-backed loans, these types of loans and VA loans, in particular, have a much higher close rate than conventional loans.
While it’s true that some government-backed loans come with steep interest rates, others have even better rates than conventional loans. The rate you get will depend on many factors such as your credit score and the lender you choose, but in general, government loans are known for having lower interest rates—on average—than conventional loans.
A common misconception in the mortgage world is that government-backed loans take forever to close but studies show that while the average conventional loan takes 49 days to close, VA loans take about 50 days on average. Again, while these are just averages, don’t overlook the benefits of a government-backed home loan because you think they take too long to close. Whitley Mortgage can help you navigate the mortgage timeline of the loan that is best for you.
To find out more about government-backed loans and which one of them might be right for you, contact Whitley Mortgage today to explore all your financing options.