Government Loans FHA Loans The FHA (Federal Housing Administration) program provides buyers with a relatively easy way to qualify for a home loan of a limited value. An FHA loan requires approximately 3-percent down payment and is easier to qualify for than a conventional loan. The government does not loan the money, but instead pays the lender if a borrower fails to make payments. Though designed to encourage loans to first-time buyers, anyone who meets the loan guidelines can qualify for an FHA loan. Advantages of an FHA loan: 1. Low down payment (less than 3 percent) 2. Gift money allowed for down payment 3. Lenient credit requirements 4. No prepayment penalty 5. Assumable loan 6. Good interest rates Disadvantages of an FHA loan: 1. The loan amount is limited and is based on your county. For example, the maximum loan amount in Sacramento County is $188,100. If you choose a higher-priced house, you will have to pay the difference in cash, or choose a different loan program. 2. FHA mortgages require a mortgage insurance premium. This does not need to be paid in cash, but is added to you loan amount. VA Loans For those who qualify as a military veteran, a VA (Veterans Administration) loan is one of the least expensive loans available. The VA does not lend the money, but it does guarantee the lender that it will cover a percentage of the loan should the borrower fail to make the payments. Advantages of a VA loan: 1. Low interest rates 2. No down payment is required 3. No private mortgage insurance is required Disadvantaged of a VA loan: 1. Available only to military veterans 2. VA funding fee 3. Loan amount limited to $203,000