Get the Lowdown on Uncle Sam's Programs

Take advantage of the many federal home-buying programs out there.

Not everyone who is in the market for a home has a savings account that's bursting at the seams. Whether you're young or just financially strapped, these agencies offer good alternatives to traditional home loans requiring big down payments and sketchy subprime mortgage programs:

Department of Housing and Urban Development (HUD)
Federal Housing Administration (FHA)
Department of Veterans Affairs (VA)
Fannie Mae (Federal National Mortgage Association)
Freddie Mac (Federal Home Loan Mortgage Corporation)
Ginnie Mae (Government National Mortgage Association)
American Dream Downpayment Initiative


The Department of Housing and Urban Development (HUD)
is typically thought of as a resource for low-income housing, but opportunities for middle-class and first-time homebuyers abound.

The Federal Housing Administration (FHA)
offers the bulk of these resources. First off, the FHA doesn't fund or guarantee loans, it insures them. Lenders bear less risk because if buyers can't pay their mortgage, the FHA will. Typical loans require about a 20 percent down payment, which is more than many recent college graduates, newlyweds or middle-class families have stashed away in the bank. FHA loans require a much smaller down payment, typically between 3 percent and 5 percent, because lenders know they'll make back the money even if you don't pay.

If you signed up for a few too many "risk-free" credit-card offers and found yourself buried under a pile of unpayable bills, there is some good news: FHA lenders don't care! They don't take into account your ultra-important credit score as much as your recent credit history. They also consider buyers two years past bankruptcy or with a clean financial record after a foreclosure.

The most popular FHA mortgage is by far the HUD 203 (b). FHA lenders provide 97 percent of financing, and most closing costs can be included in the loan. Mortgage insurance, which is mandatory for buyers who put fewer than 20 percent down, is added to your monthly payment.

Other options include:

  • HUD 203 (k) loans are especially for fixer-uppers. Traditional lenders won't pay for the property until the repairs are complete, but buyers can't start repairs until they own the house. This FHA loan appraises the handyman special to estimate the cost after renovations, then gives you the money for the property and repairs.
  • FHA Energy Efficient Mortgages incorporate the cost of solar panels or other energy improvements into the loan.
  • HUD Manufactured Housing Program provides financing for mobile homes and factory-built houses.
  • HUD Reverse Mortgages allow homeowners over 62 to turn a portion of their equity into cash.

To see if you qualify, talk to an FHA lender in your area.

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