Government-Backed Mortgage Insurance
The federal government funds a variety of housing programs to help make purchasing a home more easily affordable, including government mortgage insurance programs. Many of these programs work by the government offering insurance to cover a loan provided by a private institution. If you are thinking about buying insurance to buy a home with a low down payment, look at government as well as private options.
Government mortgage insurance programs are often geared toward a particular demographic, including first-time home buyers, veterans, agricultural workers, and professions such as teachers and fire fighters. Government-backed insurance agencies include the Federal Housing Administration, the Department of Agriculture’s Rural Housing Service, and the Department of Veterans Affairs.
One of the biggest differences between government insurance and private insurance is its intention. Private insurance companies are in business to make money, whereas government mortgage insurance programs exist with the intention to first and foremost help people afford to own their own homes. A number of government programs are geared toward people with lower incomes. Some of these programs will grant mortgage insurance to home buyers who pay as little as three percent of their property’s value as the down payment. Many private companies work with clients who pay at least ten or fifteen percent down when they buy a home. Government backing makes lenders more likely to accept an application from a potential borrower with a small down payment.
There are qualifying factors to be met in order to purchase insurance from the government. A credit check will be required, and sometimes there are income limits; you may be eligible for government-backed insurance only if your income does not exceed a set maximum nor be less than a set minimum that proves your ability to make mortgage payments.
A payment plan for government insurance coverage will be similar
to a payment plan through a private company. You will have to pay
premiums either by financing
the cost of your insurance into your loan or paying for the
insurance up front on a yearly or monthly basis.
Mortgage Insurance Directory