+1 vote
Is my first time trying to buy a home and I just try to find all my answers.
asked Feb 9 in FHA Loans by anonymous
edited Feb 9 by GinaPogol

2 Answers

+1 vote
Good morning and thank you for writing. Government programs can include mortgages like FHA, VA and USDA, down payment assistance (DPA), and mortgage credit certificates (MCC). So where the money comes from, and where it goes depends on the program.

Government-backed loans are in most cases provided by mortgage lenders, not the government. The USDA, FHA and VA oversee insurance programs which cover the lender if the borrower defaults and borrowers pay mortgage insurance premiums or funding fees. The money goes into an escrow account, and an escrow officer or attorney distributes the funds to sellers, real estate agents, etc.

For DPA, it's pretty much the same. If you are eligible (most likely determined by your income and where you buy), you may get funds for your down payment and / or closing costs in the form of a grant or a loan. Many times, the loan is interest-free and you only repay it when you sell. That money also goes into the escrow account, as will any money you contribute from your own funds.

MCCs, or mortgage credit certificates, subsidize mortgage interest for eligible buyers by providing a credit to you - cutting your tax bil and leaving you more money for a mortgage payment.

Good luck and thank you for your question.
answered Feb 9 by GinaPogol (35,050 points)
edited Feb 9 by GinaPogol
0 votes
There are two types of mortgage loan programs. Government and Conventional Loans. There are 3 types of government loans:
1. FHA LOANS
2. VA LOANS
3. USDA LOANS
Fannie Mae and Freddie Mac are the two GSE that sets conventional loan guidelines. Conventional Loans are called Conforming Loans because they need to conform to Fannie Mae and Freddie Mac mortgage guidelines. FHA LOANS are the most popular government loan program for first time home buyers.  Nobody gets any money  from government loans. These government home agencies role is to insure home loans oruginated and insured by private mortgage lenders in the event borrowers default. Due to the government gurarantee, mortgage lenders can offer mortgage borrowers low down payment on purchase with very low rates and less than perfect credit scores.  FHA requires only 3.5%  No down payment is required on VA and USDA LOANS.  Conventional Loans require 3% down payment to 5% down payment depending on credit scores. Home buyers normally don't have to worry about closing costs because it can be covered with sellers concessions or lender credit. Hope this answers your questions.

Gustan Cho NMLS 873293
The Gustan Cho Team at USA MORTGAGE
www.gustancho.com
answered Feb 9 by GustanCho (107,040 points)
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