6 Myths about Government-backed Home Loans

Couple moving boxes into new kitchen

Myth 1: FHA, VA and USDA loans are only for first-time homebuyers.

Fact: You do not need to be a first-timer, but the new home must be your primary residence.

Myth 2: USDA loans are only for farmers.

Fact: Although the purpose of USDA loans is to help people buy in rural areas, they are available in many places, including small towns. Population requirements can change with the area, so find out more by asking a TwinStar mortgage expert.

Myth 3: You must be either active military or a veteran to get a VA loan.

Fact: You may qualify for a VA loan if you are the surviving spouse of a veteran and have not remarried. Find out more by asking a TwinStar mortgage expert.

Myth 4: You can get a VA loan only once.

Fact: You may be able to get VA loan more than once, but the loan must be for your primary residence. If another qualifying veteran or military person assumes your first VA loan, you can apply for another. You may be able to use your VA loan benefit to refinance an existing loan.

Myth 5: You cannot use a government-backed loan to buy anything other than a single-family home.

Fact: You may be able to buy a HUD-approved condo, duplex or up to 4-unit multifamily building, provided you will live in one of the units.

Myth 6: FHA loans are always the best deal.

Fact: FHA loans are easier to qualify for, and your down payment may be as low as 3.5%. But if you can qualify and afford 5% down, a conventional mortgage may be a better deal for you. A conventional loan requires private mortgage insurance (PMI), which may be cancelled over time. An FHA loan requires both an upfront mortgage insurance payment (MIP)—a percentage of your initial loan—and monthly MIP payments. Monthly MIP payments cannot be canceled for the life of the loan. Also, the smaller the down payment, the more you borrow and the more interest you pay over time.