Want to Make and Save Money? Don’t Ignore Government Home Loans

Homeownership is a dream for most Americans, most of which have concerns whether they can afford it or whether they can qualify for a home loan on the property. Since most conventional home loans require that applicants have a credit score in the high 600’s and make a 20% down payment on a property.  
Thankfully, Government guaranteed home loans exist, and they offer excellent benefits and more lenient eligibility requirements. This is because they are guaranteed by the Government, which protects lenders from loss if the borrower ends up defaulting on their home loans. Using these loans in combination with real estate investment strategies could result in extra income for the borrower.
Government Guaranteed Home Loans  
Since their creation, <a href=”https://www.fedhomeloan.org/government-home-loans/”>Government loans</a> have helped millions of Americans achieve the dream of homeownership. With more lenient eligibility standards and desirable benefits. They are a great alternative to conventional home loans.  

• VA Home Loans

One of the most well-known Government-backed home loans is administered by the Department of Veteran Affairs (VA). These loans are exclusively for Active Duty Service Members, Veterans, and eligible spouses. They offer some of the best benefits out of any home loan with perks like:

• No Down Payment Requirement.
• No Mortgage Insurance Premiums.
• Low Monthly Payments.
• No Prepayment Penalties.
• Lower Interest Rates.
• Ability To Finance Funding Fee. 

In addition to these benefits, as of January 1st, 2020, VA loans no longer have loan limits based on the county where the property is located. Allowing Veterans to purchase property anywhere in the country as long as they can afford it. However, the loan limit removal is only for first-time borrowers. Borrowers with more than one existing VA loan are still subject to the loan limit for their county.
To be eligible for these loans, the applicant must make sure that they meet all <a href=”https://www.vahomeloancenters.org/va-home-loan-eligibility/”>eligibility requirements</a> for VA loans. These cover things like military service, property, income, to credit score requirements.   

• FHA Home Loans 

Government loans are not exclusively for Veterans or Active Duty Service Members. Loans administered by the Federal Housing Administration (FHA) are some of the most widely used outside of the military due to their eligibility requirements and benefits. They are also great for first-time buyers due to benefits like:

• 3.5% Down Payment Requirement.
• Lower Closing Costs.
• Lower Monthly Payments.
• FICO Credit Score of 580.

Additionally, specific lenders can lend out more than the property is worth to cover any repairs or upgrades that it might need. The loan is also assumable, which means that if a borrower wants to sell the property, they can do so by letting the new buyer assume the loan. 
Eligibility for an FHA loan is also quite lenient, with requirements being a steady employment history, a valid social security number, and lawful residency in the country. The mortgage payment must also be less than 31% of the applicant’s gross income, with monthly debt payments encompassing less than 43% of monthly income.  

• USDA Home Loans 

Applicants who can’t qualify for an FHA or a VA home loan due to not having the income necessary can take out loans administered by the U.S. Department of Agriculture (USDA). These Government-backed loans are for applicants who want to buy a home within eligible rural communities. As such, they offer excellent benefits including:

• No Down Payment Requirement.
• Competitive Interest Rates.
• Lower Monthly Mortgage Payments.

In addition to these loan requirements, the property being applied for must be a modest single-family home. It cannot have an in-ground pool or be used for any business purpose whatsoever. The loan can also be used to finance the adapting of a home for a differently-abled person.
Both VA and FHA home loans can also be used in combination with real estate investment strategies like BRRRR and House Hacking to allow the borrower to make passive income from their property.
What are House Hacking and the BRRRR Investment Method? 
Both House Hacking and BRRRR are investment strategies that require that the borrower rent out their property to pay for their mortgage and expenses. Most investors like using multi-family complexes for these investment strategies since they allow for more tenants and an extra level of protection if a tenant decides to move out. Since instead of losing 100% of rental income, the property owner will lose, in the case of a fourplex, 25% of their rental income.

• House Hacking 

Although both of these investment strategies have a lot of similarities. House Hacking is more of a beginner’s method since all it requires is for a multi-family property like a duplex, triplex, or a fourplex, to be bought and rented out. If done correctly, this can lead to rental income covering most, if not all, of the mortgage. 
House hacking can also be used in combination with both VA and FHA home loans. These are called VA-hack and FHA-hack, respectively. They combine the benefits from taking out these Government loans with the potential return on investment from doing a house hack.

• BRRRR Investment Method

The BRRRR method is a more complex version of a house hack since it contains many more steps, which are the reason for the odd name. BRRRR stands for Buy, Rehab, Rent, Refinance, and Repeat. This investment method is meant for investors who want to make rental income from various properties. However, it could also be used on only one property, just like a house hack. 
The most significant difference between BRRRR and house hacking is the rehabbing of the property to increase potential profits as much as possible. Both FHA and VA offer loans that can help in the financing of the rehab process. These loans are named FHA 203k loans and VA Rehab loans.  
FHA 203k loans can cover the cost of upgrades and repairs, including removing health hazards, the replacement of malfunctioning appliances, the changing of carpets, and new paint. The loan can also fund the addition of another room, essentially turning a triplex into a fourplex. However, the property cannot exceed four units.
VA Rehab loans, on the other hand, can finance the repairs and upgrades to doors, gutters, windows, and roofing. Also, VA Rehab loans can fund the changing of the property’s insulation and the removal of mold and lead paint.
Both FHA 203k and VA Rehab loans can also be used to finance the updating and upgrading of a property to meet the needs of disabled residents.   
Conclusion
In addition to opening the door to people hoping to become homeowners, Government guaranteed home loans can also help the borrower achieve financial independence. They can also give borrowers valuable land-lording experience and is a great starting point to eventually become a real estate investor.      
Phil Georgiades is the CLS for FedHome Loan Centers, a brokerage specializing in first-time buyer home loans. Phil has over 22 years of professional experience working in real estate. If you would like to learn more about programs available to you or apply for a home loan,
click here   ​
​https://www.fedhomeloan.org