Why choose an FHA-insured loan?

You're a first-time homebuyer.
You don't have a lot of money to put down on a house.
You want to keep your monthly payments as low as possible.
You're worried about your monthly payments going up.
You're worried about qualifying for a loan.
You don't have perfect credit. 

For more information: http://www.hud.gov/buying/loans.cfm

A VA loan is a mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs. The loan may be issued by qualified lenders. The VA loan was designed to offer long-term financing to American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment. Eligible areas are designated by the VA as housing credit shortage areas and are generally rural areas and small cities and towns not near metropolitan or commuting areas of large cities.

The VA loan allows veterans 100% financing without private mortgage insurance or 20% second mortgage. A VA funding fee of 0 to 3.3% of the loan amount is paid to the VA and is allowed to be financed. In a purchase, veterans may borrow up to 100% of the sales price or reasonable value of the home, whichever is less. Since there is no monthly PMI more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment. In a refinance, veterans may borrow up to 90% of reasonable value, where allowed by state laws.

VA loans allow veterans to qualify for loans amounts larger than traditional Fannie Mae / conforming loans. VA will insure a mortgage where the monthly payment of the loan is up to 41% of the gross monthly income vs. 28% for a conforming loan assuming the veteran has no monthly bills.

What are Fannie Mae and Freddie Mac, and what do they do?

Fannie Mae and Freddie Mac are "government-sponsored enterprises" (GSEs). This means that they are privately owned, but receive support from the Federal Government, and assume some public responsibilities.

The GSEs provide a secondary market in home mortgages, purchasing mortgages from the lenders who originate them. They hold some of these mortgages, and some are "securitized" -- sold in the form of securities which the GSEs guarantee.

The two GSEs today are among the largest corporations in the world.

What Mortgages Do the GSEs Purchase?

"Conforming mortgages" as they are called consists of all home mortgages that meet the underwriting requirements of the agencies, and are no larger than the largest loan the GSEs are allowed by law to purchase. In 2003 the maximum was $322,700. It is raised every year in line with increases in home prices. The mortgages the GSEs can purchase account for roughly 80% of the conventional (non-FHA/VA) home loan market.

What Kind of Support Do the GSEs Receive From Government?

The major support consists of the credit lines with the US Treasury. This, along with their histories -- both were public institutions before they became privately owned -- mark them as having a special claim for Government assistance in the event they ever get into financial trouble. As a result, investors consider the notes they issue and the mortgage securities they guarantee almost as good as securities issued by the Federal Government itself.

Minimum age requirement is 62 years old to qualify.

Minimum age requirement is 62 years old to qualify.