Posted By: Dr. Frugal in Loans on 06/12/2007 at 10:04:57
Government loans like FHA and VA loans make home ownership possible for some people who might have a more difficult time qualifying for a mortgage. The federal government insures the loan, which is issued by a regular lender. FHA loans typically require a less substantial down payment than a regular mortgage: 5% rather than 10% or 20%. They allow a higher debt percentage and allow the borrower to also borrow the down payment and closing costs from a family member or friend, which is technically illegal to do with a traditional mortgage. VA loans are for veterans and require no down payment at all. These VA loans have even few requirements for the debt-to-income ratio.
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