3 Things You Didn’t Know About Government-Backed Loans
Conventional loans are the foundation of the mortgage industry. In a recent week, only about one in four prospective borrowers applied for a government-backed loan, according to survey data from the Mortgage Bankers Association.
The Federal Housing Administration and the Department of Veterans Affairs basically insure home loans made by participating lenders. These loans tend to have more lenient credit and underwriting requirements compared to conventional loans, which carry no government backing.
FHA and VA loans feature benefits that can be the right fit for the right buyer at the right time. To be sure, they also come with their own drawbacks. But there are misconceptions surrounding government-backed loans that can cloud the home-buying process and hurt both buyers and sellers.
Let’s take a quick look at three benefits of government-backed loans that tend to fly under the radar.
They Have Lower Average Interest Rates
Many buyers assume they can get the best interest rate with a conventional mortgage. Depending on your credit, the size of your down payment and other factors, that might be exactly the case. But every buyer’s credit and asset picture is different.
More important — and perhaps surprisingly — average interest rates actually tend to be lower on government-backed loans.