For many Americans, buying a home or graduating from college can be a major time in one’s life. However, many people believe that they aren’t in the financial position to make these goals happen. Luckily, that might not be the case with the help of a federal loan! You could benefit from a federal loan because they are usually easier to get than traditional private loans. With that said, there are different government loans that serve a variety of purposes. In order to make the best decision, you should know what different loans are out there!
Federal Financing That You Should Consider
There are numerous federal loans that help with things like purchasing a home or attending college. With that in mind, each loan functions differently. Federal loans that you can consider include:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Single Family Guaranteed Loan Program
- VA Home Loans
- Single Family Housing Repair Loans and Grants
- FHA Home Loans
Direct Subsidized Loans
College is a major expense. This is because tuition has the potential to cost thousands of dollars each year. In addition to that, a student is responsible for purchasing pricey books! Fortunately, the government recognizes that some students need financial support. Direct Subsidized Loans can be a good option for those needing help with the costs. This loan program is provided by the United States Department of Education (ED). In order to qualify for this loan, a student has to provide proof of financial need.
If an undergraduate student meets the criteria, the government will cover the interest for a certain period of time. This time frame includes:
- Throughout the 6 month grace period after the student is no longer enrolled
- During a period of deferment
- While the student is enrolled in school (for a specific amount of time)
You can apply for this loan opportunity by completing the Free Application for Federal Student Aid (FAFSA). You can also reach out to the financial aid office at your school for help! It is important to keep in mind that there are limitations to how much a student can borrow. That amount is different for each person. This is because it is dependent on their personal situation.
Direct Unsubsidized Loans
Direct Unsubsidized Loans are another loan program intended for students pursuing a higher education. Per year, the maximum amount a student can receive is $20,500. You can also apply for this loan opportunity by submitting a FAFSA. This loan is similar to subsidized loans in that they are both provided by the ED. Students that are able to access this loan program include:
- Graduate Students
- Professional Students
- Undergraduate Students
Single Family Guaranteed Loan Program
The Single Family Guaranteed Loan Program is different from the loans we mentioned above. This is because this loan is intended for potential homebuyers. This mortgage program is also referred to as the Section 502 Guaranteed Loan Program. The United States Department of Agriculture (USDA) provides this program. Recipients of this loan can benefit from no down payment requirements and no minimum credit score requirements.
Not all potential homebuyers are able to benefit from this loan. The reason for this is because it comes with certain income requirements. With that said, the reason this loan is more accessible than private loans is because the program provides a guarantee to approved lenders. This means that lenders can give out loans with less risk involved. Therefore, lenders are able to be less picky with who they lend to!
VA Home Loans
Another mortgage program on this list is VA Home Loans. This home loan is provided by the United States Department of Veterans Affairs (VA). This program is available to veterans, active service members, and eligible spouses. Qualifying individuals are awarded these loans through private lenders. Since the VA guarantees them, it lowers the risk for the lender. In addition, there are a few advantages to this program! VA guidelines state that some of those include:
- No down payment requirements
- Potentially reduced interest rates
- No requirement for Private Mortgage Insurance (PMI)
- Easier eligibility criteria
It is important to keep in mind that not every private lender has the same requirements. Their loan terms may be different from the VA.
Single Family Housing Repair Loans and Grants
This loan option is for homeowners who want to make updates or repairs to their homes. You might also recognize it as the Section 504 Home Repair Program. It is provided by the USDA. Applicants that qualify can receive up to $40,000 in loans and $10,000 in grants. This totals $50,000! The best part is that what you receive as a grant does not need to be repaid. Another benefit of this program is that the loan interest rate is 1%. This rate is fixed, so it isn’t dependent on your credit score or other factors!
FHA Home Loans
Lastly, there are FHA Home Loans. These mortgages might be the most well-known loan program on this list! Only approved lenders are permitted to give out this type of mortgage. These mortgages are a favored government loan for many homebuyers, including first-time buyers. Some of the requirements that make this mortgage more accessible include lower credit score requirements and reduced down payment requirements. These mortgages are insured by the Federal Housing Administration (FHA) which makes all of this possible!
Conclusion
While purchasing your home or pursuing a higher degree may be intimidating, there are options to make them more affordable. Deciding on a loan opportunity that best suits your needs is easy when you know exactly what each loan is for! Some of the government loan programs available are:
- Direct Subsidized Loans
- Direct Unsubsidized Loans
- Single Family Guaranteed Loan Program
- VA Home Loans
- Single Family Housing Repair Loans and Grants
- FHA Home Loans
There are certain criteria that recipients must meet for each program. The benefit of these loans over traditional private loans is that they are more accessible. When deciding which loan is best for you, take a look at your specific needs. If you feel like buying a home or earning a degree is out of reach because of financial reasons, these opportunities may be able to help!
