How to Save Money With A Government Backed Mortgage

By | July 7, 2010

When most people find their dream home and decide to purchase it, they assume that mortgages are generally the same everywhere and that they have few options besides choosing the term of their loan and whether they’ll take out a fixed rate or adjustable mortgage. However, all mortgages are not created equal and there are some loan products out there that can save you thousands of dollars over the course of your loan. Government backed mortgages are some of the most reliable, least expensive, and have some of the easiest qualification standards in the industry, but are often overlooked simply because many buyers aren’t aware of their existence.

The FHA, VA, and USDA home loan programs each work to provide loan products to homebuyers who may not be otherwise able to qualify for a traditional bank loan due to income restraints, past credit problems, or the cost of homes in their area. Each loan program features a wide range of loan products and can accommodate almost every lifestyle and budget.

The real money-saving power of these loan programs, however, is found in the interest rates and terms of each loan product. The VA mortgage program, for example, which is open to veterans, active duty service members, and their families, provides a zero down payment option for their loans and the ability to roll the closing costs into the loan payments. When you stop to consider that both of these options come in addition to the VA program’s low interest rate, it’s easy to see that buyers won’t have to dip into their hard-earned savings very far in order to purchase their first home. In fact, not providing a down payment or closing costs upfront for a loan can free up plenty of money for investing and other financial activities which can radically improve a family’s financial future.

The FHA and USDA programs also provide several money-saving opportunities for buyers and are open to first time homebuyers and lower income buyers (who make up to 115% of an area’s median income) respectively. FHA home loans require only 3% of the purchase price as a down payment and, like VA loans, permit financing the closing costs into the loan, which can save borrowers as much as $8,000 in upfront fees and costs. The USDA takes it one step farther, and allows buyers to finance 103% of the purchase price, which provides 3% cash back at closing to use for home repairs or property renovations. Under the USDA program, buyers have a slightly longer loan term which lowers payments by a considerable amount each month as well.

Purchasing a home with a government-sponsored loan is an easy and trustworthy way to get the most for your money. And because each loan program is available at banks and other lending institutions, the process for applying for a government backed mortgage is very similar to the application process for a traditional loan. For more qualification and application information relevant to each loan program, speak with your local lender.

The above was a guest post by Robert Stretch, the founder of, a blog that helps veterans realize their potential benefits.

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