Most Common Government Loan Programs
Government loans can come in many forms, not all of them directly through the government. While there are strict stipulations for qualifying for loans from the government, they can be helpful in business, with education, and in obtaining housing.
If you feel that a government loan may help you with your financial goals, it’s important to have an understanding of what each loan entails, the types of programs available, and if you qualify. We’ve compiled some information below on the most common government loan programs to help.
Housing Loan Programs
One of the most popular types of government loans is to fund housing. The government views home loans as an opportunity to improve communities because homeowners take pride in their homes typically and tend to be more involved with their community. Let’s explore some of the most popular types of federal home loans you can potentially qualify for:
- VA Loans - VA loans are for military veterans and are financed at low interest rates and require no down payment to secure a mortgage.
- FHA Loans - FHA loans allow qualified borrowers to secure a mortgage with as little as 3.5% down and at low finance rates. These loans are also popular because you can qualify (depending on the lender) with a credit score as low as 540. You will be required to carry mortgage insurance for some time with this type of loan; this is because you put down less than 20% of your mortgage as a down payment.
- USDA Loans - USDA loans are zero-down loans and can help those that qualify purchase homes in less populated areas of the country. You will be limited to USDA qualified areas for your home purchase and have to meet certain income and credit score requirements, but it’s worth checking into.
- Home Improvement and Repair Loans - If you already own a home but need assistance in securing a loan to ensure your home is clean and habitable, there are certain government loans in place. These loans are specially made accessible to those homeowners affected by a natural disaster.
- Energy Efficiency Loans - If you are trying to upgrade your home with something like solar to make it more energy-efficient, the government can sometimes help with programs such as PACE.
Student Loan Programs
Perhaps the largest and most popular type of government loan is the student loan. If you need assistance in funding your education, you may qualify for a loan from the government to help. Some common loans that are utilized by students are:
- Stafford Loans - This is a loan offered to qualified students that is based on financial need and will not require repayment until the student has graduated.
- Direct PLUS Loans - This can be borrowed by either the parent or student and will be based on credit eligibility. Students will not have to begin paying on the loan until 6 months after graduation.
- Parents PLUS Loans - This is for the parents of students attending school. The loan is expected to be paid on while the student is attending school and will be based on the borrower’s credit history and score.
Business Loan Programs
In an attempt to support the growth and continuation of small businesses in the US, the government has instituted certain plans to assist in loans needed. A well-known and used business loan program is SBA 7, in which the business can borrow up to $2 million. Be prepared to sign a personal guarantee, however, which will hold you personally responsible for the debt should the business be unable to repay it. It is generally recommended that you attempt to secure a loan with a private lender before seeking loan approval from the government.
Alternatives To Government Loan
If a government loan is not for you,