Tuesday, June 19, 2012

How to Get a Government Loan for a Home Purchase

By DB Jenkins

Consumers in the United States can get government help to achieve home ownership. In addition, members and former members of the U.S. Armed Forces can get low-cost financing for home loans. These two programs are available to a large segment of the population, but there are certain restrictions. The two government housing organizations are the Veterans Affairs Administration (VA) and the Housing and Urban Development Administration (HUD). The lending arm of HUD is the Federal Housing Administration.

Pull a recent copy of your credit report. This can be accessed at AnnualCreditReport.com. The federal government allows one free report per consumer every year. You should also pay for a copy of your credit score, or FICO score, to find out where you fall on the credit spectrum. Excellent scores are above 720; poor scores are below 600.

Order a Certificate of Eligibility if you are a veteran or current member of the U.S. Armed Forces. You cannot apply for a VA loan without this certificate. You will need to fill out Form 26-1880 (see Resources) and send supporting documentation (military record) to obtain this certificate.

Find a FHA- or VA-approved lender. The federal government is not a direct home loan lender. Instead, the VA and HUD administrations review private lenders and approve those who meet the lending criteria. See Resources for a search tool to find a local lender.

Choose two or three lenders based on your credit score. Banks and credit unions finance only top-tier credit customers (those with FICO scores above 720). If you have shaky credit, you'll need to apply at finance companies like Wells Fargo Financial.

Review the loan options available at your potential lenders. Fill out applications and compare rates, fees and terms. Make sure you have a relatively clear understanding of your financial goals. This will help you weed out certain mortgage programs.

Accept a loan offer and provide your loan officer with all documents in the "Things You'll Need Section." This will speed up the time it takes to gain a pre-approval.


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