Understanding your mortgage options

If you’re looking at getting a mortgage, there are a number of different options to consider. From government-backed mortgage programs to assistance with down payments and closing costs, here’s what’s available.

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Government-backed loans1

FHA loans:
If you have limited funds for a down payment, an FHA mortgage might be right for you. These loans are backed by the Federal Housing Administration, and down payments generally start at 3.5 percent.
Visit: HUD.gov for details.

VA loans:
If you’re in the military, a veteran or an eligible surviving spouse, the VA home loan may make home ownership easier. Benefits include low or no down payment, (Link: https://bettermoneyhabits.bankofamerica.com/en/home-ownership/how-va-home-loans-work) possible lower interest rates, and no private mortgage insurance.
Visit: benefits.va.gov/homeloans for details.

FHA 203(k) loan:
If you are thinking of buying a fixer-upper as your primary residence, the FHA 203(k) renovation loan might be able to help.
Visit: HUD.gov for details.

Other government programs:
There are a number of other programs, as well. For example, teachers or police officers in revitalizing areas may be eligible for a homebuying discount through the Good Neighbor Next Door program.
Visit: govloans.gov or contact a HUD-approved housing counselor by visiting HUD’s website.

Exploring your options
Different mortgage loans and assistance programs have varying requirements and benefits. Talk to your lender about the different programs and explore what’s best for your situation.

Assistance programs
There are different programs and tools that you can use in conjunction with your mortgage to help ensure successful home ownership.

Local programs:
Check with your local housing agencies and nonprofits for programs that provide down payment and closing cost assistance.

Employer programs:
Some employers provide down payment and closing cost assistance for their employees.

Homebuyer education (HBE) programs:
A homebuyer education program is usually required when you use an assistance program. Contact a HUD-approved housing counseling agency to learn more.

Mortgage credit certificates:
This tax credit could reduce your federal income tax liability, which would free up more funds to qualify for and repay a loan.

Eligibility for assistance may depend on:
Type of mortgage
Property location
Steady source of income
Savings for a down payment
Credit score

  1. FHA mortgage insurance helps protect the lender (not the borrower) if a borrower defaults on the FHA loan. Each FHA borrower pays a Mortgage Insurance Premium. The premiums are collected and used by the FHA to reimburse the lender (not the borrower) should the borrower default and the lender must foreclose upon the loan/sustain a loss. Similarly, the VA guaranty helps protect the lender (not the borrower) against loss if the borrower fails to repay the VA loan. Borrowers pay an upfront funding fee towards the VA guaranty.
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The material provided on this website is for informational use only and is not intended for financial or investment advice. Bank of America and/or its affiliates, and Khan Academy, assume no liability for any loss or damage resulting from one’s reliance on the material provided. Please also note that such material is not updated regularly and that some of the information may not therefore be current. Consult with your own financial professional when making decisions regarding your financial or investment options.

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