Other Mortgage and Loan Programs

Here are some of the different types of other mortgage and loan programs that might be available to you:

Part 1: U.S. Department of Veterans Affairs (VA) mortgages

The United States Department of Veterans Affairs (VA) offers home mortgages to eligible Veterans.

A VA Housing Specialist can advise a buyer about the different types of VA mortgages available.

Buyers may visit the VA webpage that offers information about available benefits, eligibility requirements and how to apply here.

For additional information, call the VA loan center at (877) 827-3702.

VA Home Loan

VA home loans can be used to purchase a home, purchase a manufactured home, build a new home or buy and renovate an existing home.

To be eligible, you must:

• Be a U.S. Veteran or married to a U.S. veteran.
• Have a valid VA home loan certificate of eligibility (COE). (Find out if you qualify for a COE here)
• Meet the VA credit standards.
• Have income enough to cover the mortgage and other costs. (Learn more about Debt to Income Ratio here)
• Live in the home you use the funds to purchase, build or rehabilitate.

VA Native American Direct Loan (NADL)

The Native American Direct Loan is also a direct loan from the VA and frequently has better rates and lower costs than home loans from banks or mortgage lenders because the VA is the lender. 

To be eligible:

• You must be a Native American Veteran or married to a Native American veteran.
• Your tribal government must have an agreement or Memorandum of Understanding (MOU) with the VA which details how the program works on the tribal trust lands.
• You must have a valid VA home loan certificate of eligibility (COE)
• You must meet the VA credit standards
• You have enough income to cover the mortgage and other costs. (To learn more about Debt to Income Ratio, click on the Consumer Finance Protection Bureau’s Buying a House  information guide.)
• You will live in the home you use the NADL funds to purchase, build or rehabilitate.

VA Owned Homes

The VA acquires some properties as a result of foreclosures on VA-guaranteed or VA-financed loans. These homes usually are in need of repairs and many are older homes. The prices of VA foreclosed properties tend to be lower.

VA properties for sale are listed through a contracted vendor. There are not many VA owned homes, but if interested, a buyer may view the listings at VA properties list. The VA advises a buyer to contact a local real estate broker of the buyer’s choice, for more information about a specific home.

Part 2: USDA Loans

USDA Section 502 Guaranteed Loan Program

Much like FHA-Insured mortgages, the U.S. Department of Agriculture (USDA) Rural Development agency insures mortgages made with USDA approved banks and lenders. This type of insured loan does not require the buyer to provide a down payment, allowing for 100% financing of the home.

The Section 502 Guaranteed Loan Program can be used to purchase, build, repair, or even relocate a home in eligible rural areas.

The program covers homes located or built in 97% of the United States. Homes in urban areas are not eligible. Areas covered by this program can be found here.

Buyers must meet specific requirements including:

• Citizenship: You must be a U.S. Citizen, U.S. non-citizen national or Qualified Alien.
• Income Eligibility: Your total income cannot be more than 115% of median household income for that area. Eligibility can be determined using the worksheet found here- Eligibility Check Worksheet (usda.gov).
• Living in the Home: You must use and live in the dwelling as your primary residence.

USDA Direct Loan

The Section 502 Direct Loan Program helps families who have low-to-moderate income and want to purchase, build, renovate or relocate a home, or purchase and prepare sites, including providing water and sewage facilities, in a rural area. A USDA Direct Loan means the USDA is the direct lender and no other bank or mortgage lender is involved.

The USDA Direct Loan program will have a fixed interest rate based on current market rates at loan approval or loan closing, whichever is lower. However, with payment assistance, the interest rate can be as low as 1%. The loans have up to a 33-to-38 year payback period (depending on the buyer’s circumstances) and usually no down payment is required.

Payment assistance is a part of the USDA Direct Loan which helps cover the monthly mortgage payments, but only for a short period of time. The buyer is obligated to pay all or a portion of the payment assistance received during the life of the loan when the buyer moves out or sells the home.

To obtain a USDA Direct Loan, the buyer must meet the following eligibility requirements:

• Be without decent, safe and sanitary housing.
• Be unable to obtain a loan from other resources on terms and conditions that can reasonably be expected to meet.
• Agree to occupy the property as your primary residence.
• Have the legal capacity to incur a loan obligation.
• Meet citizenship or eligible noncitizen requirements.
• Not be suspended or debarred from participation in federal programs.

Properties financed with direct loan funds must:

• Generally be 2,000 square feet or less.
• Not have market value in excess of the applicable area loan limit.
• Not have in-ground swimming pools.
• Not be designed for income producing activities.

For the USDA, a Homebuyer Education Course certificate is required for first time homebuyers. 

You can determine eligibility here.

More information can be found here.

Part 3: Fannie Mae and Freddie Mac

The Federal National Mortgage Association (FNMA) known as Fannie Mae, is privately owned but government-sponsored and is under the conservatorship of the Federal Housing Finance Agency (FHFA). Fannie Mae purchases secondary mortgages (mortgages already completed with a bank) from commercial bank lenders.

Although Fannie Mae does not offer mortgages directly, it does set the guidelines for mortgages programs such as HomeReady mortgages, 3% down payment mortgages and mortgage programs available through state and local Housing Finance Agencies (HFAs),for low-to-moderate income buyers. 

Fannie Mae keeps a list of their preferred lenders here.

The Federal Home Loan Mortgage Corporation (FHLMC) known as Freddie Mac is very similar to Fannie Mae, except it usually purchases secondary mortgages from smaller banks. Freddie Mac does not make direct mortgages either but does set the guidelines for the mortgage program called Home Possible 3% down payment.

After a buyer gets a mortgage from a bank, Fannie Mae or Freddie Mac may purchase the buyer’s mortgage from the bank.

Freddie Mac or Fannie Mae will keep the mortgage or combine that mortgage with other mortgages in a bundle and offer the bundle as mortgage-backed securities for investors to purchase.

If a buyer cannot continue to pay a mortgage and that mortgage was part of a bundle purchased by an investor, Fannie Mae or Freddie Mac will pay out the price of the mortgage to the investor.

Part 4: Habitat for Humanity

Habitat for Humanity builds or renovates homes for qualified families. If you are living in damaged, unhealthy or poorly built housing or the rent for the home is too expensive, or if you are disabled and living in inaccessible housing, you probably will qualify for the Habitat for Humanity program. According to the Habitat for Humanity website, the basic qualifications for the program include:

• Being in need of better housing
• Willing to partner with Habitat
• Able to pay an affordable mortgage 

As with many housing programs, funding is limited. To apply, check with your local Habitat for Humanity office here, or call Habitat for Humanity at 800-422-4828 for more information.

If your application is accepted, you will be obligated to put in ‘sweat equity,’ which means you will help build your home or the home of others, or work in the Habitat for Humanity home store called Habitat ReStore.

Also, you will need to take classes in financial management where you will learn about credit repair, budgeting, bank accounts and other financial matters.

Part 5: More Programs

States and Housing Agencies may use federal HOME and CDBG funds to build new homes or renovate older homes for low income buyers to purchase. Additional homeownership programs may be offered locally by your state or city. You can access your state list here.