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Published by Contour Mortgage on October 20 2023

Benefits of a Government-Backed Mortgage

Topics: Veterans, Home Buyers, Reverse Mortgages, 203k Loan, USDA, FHA

With more buyers than ever before, bidding wars, and heated competition, it can be daunting to find your dream home and suitable financing.

It doesn’t have to be, however, when you enlist a reputable partner such as Contour Mortgage!

While conventional mortgages are the usual route, you’d be remiss not to consider alternative options such as government-backed mortgages. Offered only through approved lenders, these provide additional leeway for borrowers of varying incomes and credit levels. 

The most common government-backed home loans are available through the Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA), and Veterans Affairs (VA). 

Whether seeking to own a dream home in a rural area, adding renovation costs to your mortgage, or you’re an active or retired U.S. military service member or spouse—these loans feature less-stringent down payments, credit requirements, and debt-to-income (DTI) ratios.

Let’s review the many benefits of government-backed home loans offered through Contour Mortgage.  

What Are Government-Backed Home Loans?

These non-conforming loans feature various cost structures, with a shared advantage of more lenient requirements and qualifications. These include 3.5 percent down payments, lower credit scores, and private mortgage insurance (PMI) exemptions. It’s always recommended that any borrower should remain in good financial standing from pre-approval to closing.

Loans offered through the FHA can include renovation costs through the agency’s 203(k) Standard and Limited options. Reverse mortgages are applicable to those aged 62 and older with a low remaining balance. 

Government-Backed Mortgage Benefits

Here is a useful rundown of several common advantages of these loans:

  • Less-Stringent Qualifications: FHA, USDA, and VA loans don’t require the typical 20 percent down and top credit scores of conventional mortgages.
  • Lower Down Payments: FHA and USDA loans require only 3.5 percent down at closing. 
  • No Minimum Credit Rating: Borrowers with fair or poor credit, foreclosures or other unfortunate financial situations could be exempt.
  • Higher DTI Ratios: These loans share more lenient thresholds regarding ratios of borrowers’ overall debt to annual income. 
  • Option to Improve Finances: Building home equity and credit can also strengthen your financial portfolio, leading to PMI exemptions and lower monthly payments.
  • Zero Percent Down: VA and USDA loans permit borrowers to finance the total purchase price without a down payment.
  • Gifting Opportunities: Borrowers applying for FHA home purchase or improvement loans can enlist family members, employers, or other approved parties to transfer up to 100 percent of the down payment. 
  • First-Time Home Buyer Grants: Various state, local, and nonprofit organizations offer home purchase and improvement project grants for first-time buyers. 
  • Additional VA Loan Benefits: Borrowers aren’t required to purchase PMI or Mortgage Insurance Premiums (MIPs). These loans also include free credit counseling, and are assumable if closed subsequent to March 1, 1988.

It’s important to note that government-backed loans are suitable for both home purchase and improvement of single-family homes, multi-family dwellings, condos and co-ops, and manufactured homes—but secondary and vacation homes aren’t applicable.


The Takeaway

If you’re still grappling with the home loan process, consider contacting our team of highly trained mortgage specialists and experienced loan officers to outline applicable government-backed loan benefits, requirements, and qualifications.

Contact Contour Mortgage for a free consultation and to learn more about the many benefits of government-backed loans.

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