Government Home Loans to Buy, Refinance or Renovate

Many options are available to help home buyers and homeowners.
Barbara Marquand
By Barbara Marquand 
Edited by Alice Holbrook Reviewed by Michelle Blackford

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Government home loans are mortgages that are guaranteed or issued by a federal agency to help first-timers, rural residents, veterans and others buy, refinance or improve a home.

The three biggest loan programs are backed by the Federal Housing Administration, U.S. Department of Veterans Affairs and U.S. Department of Agriculture. With low or no down-payment requirements, these loans are often good options for first-time buyers, although they're open to repeat buyers, too.

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Government home loans for buying

FHA home loans

FHA loans are backed by the Federal Housing Administration and issued by FHA-approved private lenders. The down payment requirement is as low as 3.5% with a minimum credit score of 580 and 10% with a minimum credit score of 500.

Borrowers must pay for mortgage insurance, including an upfront premium of 1.75% of the loan amount and an annual premium ranging from 0.15% to 0.75% of the average outstanding loan balance. The annual cost, which is divided into monthly installments, depends on the down payment, loan amount and term. Mortgage insurance can be canceled after 11 years with a down payment of 10% or more.

Properties must meet FHA minimum requirements and be within FHA loan limits, which generally are up to $472,030 for single-family homes in low-cost areas and up to $1,089,300 in high-cost areas.

USDA home loans

USDA mortgages are no-down-payment loans for moderate- and low-income buyers in federally designated rural areas.

Most USDA loans are guaranteed by the U.S. Department of Agriculture and issued by approved lenders. Your household income must be under 115% of the median household income in your county. Loan limits also apply. You can learn more about those limits in your area on the USDA website.

Unlike FHA loans, USDA guaranteed loans don't require mortgage insurance. Instead, borrowers pay an upfront fee of 1% of the loan amount and an annual fee of 0.35% of that year's average outstanding loan balance. The annual fee is divided into monthly installments and included in mortgage payments.

The USDA also issues home loans directly to low-income buyers who are without safe housing and can't otherwise get a home loan.

VA home loans

VA loans are no-down-payment mortgages for active-duty and veteran military members and some surviving spouses. The loans are guaranteed by the U.S. Department of Veterans Affairs and issued by approved lenders.

VA loans don't require mortgage insurance, but most borrowers will pay an upfront funding fee, which ranges from 1.25% to 3.3% of the loan. The amount depends on your down payment and whether this is your first VA loan.

Homes must meet the VA's minimum property requirements.

Government mortgage programs for refinancing

FHA rate and term refinance

A rate and term refinance loan lets you refinance an FHA or other mortgage to get a lower interest rate or different term, such as a 30-year loan instead of a 15-year mortgage.

FHA streamline refinance

An FHA streamline refinance makes refinancing easier because it doesn't require a home appraisal. To qualify, you must have an FHA loan and a history of making mortgage payments on time. With a non-credit-qualifying streamline refinance, the lender isn't required to check your credit.

FHA cash-out refinance

An FHA cash-out refinance replaces your mortgage with an FHA loan and lets you convert some of your home equity into cash.

USDA streamlined assist refinance

A streamlined assist lets you refinance a USDA guaranteed or direct loan to lower your payments. No appraisal or credit check is required in many cases.

VA Interest Rate Reduction Refinance Loan

The VA streamline refinance, known as a VA Interest Rate Reduction Refinance Loan, or IRRRL, lets you refinance a VA loan to get a lower interest rate or lower monthly payment.

VA cash-out refinance

With this loan, you can refinance a VA or other type of mortgage and convert some of your home equity into cash.

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Government-backed mortgages for home improvements

FHA home improvement loans

The FHA 203(k) mortgage allows you to buy or refinance a home and include the cost of improvements in the same loan.

An FHA Title 1 home improvement loan is for repairs and improvements and can be used in conjunction with an FHA 203(k) mortgage.

VA supplemental loans

You must have a VA mortgage to qualify for a VA supplemental loan to finance projects that improve the safety and livability of the home. The loan cannot be used for luxuries, such as swimming pools or barbecue pits.

FHA and VA energy-efficient loans

The FHA and VA back energy-efficient mortgages, which allow you to upgrade your home with money-saving modifications that use less energy.

Rural housing repair loans and grants

Another option for rural residents is the USDA Section 504 Home Repair program. If you can't get a loan anywhere else and are on a tight budget, this loan can help with improvements and emergency repairs. Grants are available to those 62 and older.

Other government home loan programs

Home loans for Native American veterans

Native American veterans, or veterans whose spouse is Native American, can use the VA’s Native American Direct Loan program to buy, build or improve their home or refinance a mortgage. The residence must be on Native American trust land.

Section 184 Indian home loan

This loan for Native Americans, Alaska Natives and members of other designated entities or tribes allows low down payments and relaxed credit standards. The mortgage can be used to build a house, buy an existing home, pay for improvements or refinance a mortgage.

The Department of Housing and Urban Development's Section 184A program offers the same benefits to Native Hawaiians. Find complete details and participating lenders at the HUD Section 184 page.

Home and property disaster loans

In a county declared as a disaster area, homeowners may qualify for low-interest loans to repair or replace their primary residence and personal property. The program is implemented by the U.S. Small Business Administration.

FHA loans for disaster victims

A Section 203(h) loan, insured by the FHA, offers mortgages to homeowners to rebuild or replace their homes after a presidentially declared disaster. See an FHA lender for details.

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