Despite what many people think, the Federal Housing Administration (FHA) does not actually issue mortgage loans; it insures the loans for investors that purchased bond instruments secured by FHA home loans. FHA loans have more liberal qualification requirements and typically have a lower down payment requirement (as low as 3.5%), lower monthly insurance premiums and often have lower closing costs. This makes an FHA loan a very attractive loan for the first-time homebuyer and for families with low and moderate income levels.
These types of loans can be used to make improvements to an existing property or to tear down an existing structure and build a new one using some portion of the existing foundation. You can borrow up to 96.5% of the appraised value – based on the value when the improvements or repairs are completed.
VA loans are guaranteed by the U.S. Department of Veteran Affairs and Louisiana Home Lending makes the loans to eligible veterans for the purchase, construction, or energy-saving improvement (approved by the lender and VA) of a home. VA loans share similar eligibility requirements as FHA loans, often with lower closing costs, and more liberal terms (usually without requiring a down payment) and even negotiable interest rates. If you qualify, the VA will issue a certificate of eligibility that you can provide a lender when making application for your loan.
Under the Guaranteed Loan Program, Rural Development guarantees loans made by private sector lenders. A loan guaranteed through RD means that, should the individual borrower default on the loan, RD will pay the private financier for the loan. The individual works with the private lender and makes his or her payments to that lender.
Under the terms of the program, an individual or family may borrow up to 102% of the appraised value of the home, which eliminates the need for a down payment. Since a common barrier to owning a home for many families is the lack of funds to make a down payment, the availability of the loan guarantees from RD makes the reality of owning a home available to a much larger percentage of Americans.