There are numerous direct lending, subsidy, and mortgage insurance products available through federal, state, and local agencies. Direct lending is provided through federal Rural Economic and Community Development (RECD – formerly the Farmers Home Administration), state housing financing agencies, and various local governments. Mortgage insurance or loan guarantees are provided through the Federal Housing Administration (FHA), the Department of Veteran Affairs (VA), and RECD.

FHA administers numerous mortgage insurance programs.Although there are no income restrictions, most FHA insured financing is provided to lower income, first-time home buyers.

VA guarantees mortgages for veterans of the armed services, those currently in the armed services and their spouses. VA guaranteed mortgage guidelines are similar to FHA except, a loan-to-value ratio of 100% is allowed.

RECD administers several programs for low to moderate income families who want to buy new or existing homes in rural areas. The homeownership loans may be used for building, buying or improving a home.

State housing finance agencies generally issue tax-exempt mortgage revenue bonds (MRBs) to be used for family mortgages with below-market interest rates. Federal regulations outline both income and house price maximums. Some states use part of their MRB authority to issue Mortgage Credit Certificates (MCCs).Homeowners use MCCs to lower their taxable income, thereby reducing their tax burden and increasing their disposal income.

State and local governments offer many homeowner programs for lower and other underserved households. Some are funded with federal funds, or state/local originated housing trust fund revenues. These programs offer local flexibility and have favorable underwriting and repayment terms.

TYPES OF MORTGAGES

Prior to applying for a loan/mortgage for your home, you need to understand the various type of loan products available, and the specific characteristics of each. The prevailing interest rates and loan type will greatly influence the evaluation process when trying to qualify for a mortgage.The most common types of mortgages are described below.

The standard fixed-rate loan is the most common for first time home buyers.It has a fixed interest rate, a fixed principal and interest payment and is fully amortized – that is, the loan will be completely paid off – over a specified number of years. The most common is the 30-year mortgage.

Payments on a fixed- rate mortgage are almost always structured on a monthly basis.A portion of each monthly payment covers the interest due and another portion is applied toward the reduction of the principal balance. Regular payments will systematically reduce the loan balance until the loan is paid in full. The standard fixed-rate mortgages are simple to understand and they have predictable payments. It should be added that even though the monthly principal and interest portion of the monthly payment is fixed, the monthly payment may be adjusted if property taxes increase or the cost of hazard insurance changes. Fixed-rate mortgages are ideal for families that plan to live in their homes for a long period of time, or families that like the certainty a fixed-rate mortgage offers.

Adjustable-rate mortgages (ARM) are generally for 15 to 30 years and have interest rates that are adjusted periodically which potentially changes the monthly payment amounts. The initial interest rate on an ARM is usually substantially lower than the rate for fixed-rate mortgages, but adjustment in the payment generally occurs every one, three or five years based on money market conditions. This can cause the monthly payment to increase or decrease.