Government Sponsored Loan Programs
The federal government offers several loan programs that make homeownership accessible with lower credit requirements, smaller down payments, and competitive interest rates. Here’s what you need to know about each.
Quick Comparison
| Feature | FHA | VA | USDA |
|---|---|---|---|
| Min. Down Payment | 3.5% | 0% | 0% |
| Min. Credit Score | 580 (3.5% down) | No official min (620+ typical) | 640+ |
| Mortgage Insurance | MIP for life of loan | No monthly MI | 0.35%/year |
| Loan Limits (2026) | $541,287 | No limit | Income limits apply |
| Property Type | Primary residence | Primary residence | Rural/suburban |
| Who Qualifies | Any eligible borrower | Veterans, active military, surviving spouses | Income-eligible buyers in eligible areas |
FHA Loans
The FHA (Federal Housing Administration) is an agency of the Department of Housing and Urban Development. FHA doesn’t issue loans directly — it insures loans made by traditional lenders, reducing the lender’s risk and making it easier for buyers to qualify.
FHA Key Numbers
- Down payment: 3.5% with 580+ credit score, or 10% with 500-579
- Upfront MIP: 1.75% of loan amount (added to balance)
- Annual MIP: 0.55% per year (paid monthly)
- Debt-to-income: Up to 50% in some cases
- Loan limits (2026): $541,287 in most areas, up to $1,249,125 in high-cost areas
FHA Cost Example
On a $300,000 home with 3.5% down:
| Cost | Amount |
|---|---|
| Down payment | $10,500 |
| Loan amount | $289,500 |
| Upfront MIP | $5,066 (added to loan) |
| Monthly MIP | $135/month |
| Total MIP over 30 years | ~$48,600 |
The biggest downside: MIP never goes away on FHA loans with less than 10% down. Many buyers start with FHA and refinance to conventional once they build equity and improve their credit.
VA Loans
The Department of Veterans Affairs guarantees a portion of the loan, allowing lenders to offer exceptional terms to eligible military members.
VA Key Numbers
- Down payment: 0% (no down payment required)
- PMI: None — ever
- Funding fee: 1.25% to 3.3% (one-time, can be rolled into loan)
- Credit score: No VA minimum, but most lenders want 620+
- Loan limits: None for borrowers with full entitlement
VA Cost Example
On a $300,000 home with 0% down (first-time use):
| Cost | Amount |
|---|---|
| Down payment | $0 |
| Loan amount | $300,000 |
| Funding fee (2.15%) | $6,450 (added to loan) |
| Monthly PMI | $0 |
| Total insurance cost | $0 |
VA loans are the best deal in mortgage lending. No down payment, no PMI, and competitive rates. The only catch: you must be a veteran, active-duty service member, or eligible surviving spouse.
USDA Loans
For buyers in eligible rural and suburban areas, USDA loans offer another zero-down option.
USDA Key Numbers
- Down payment: 0%
- Upfront fee: 1% of loan amount
- Annual fee: 0.35% of loan amount
- Income limits: Household income must be under 115% of area median income
- Property: Must be in a USDA-eligible area (many suburban areas qualify)
USDA Cost Example
On a $250,000 home with 0% down:
| Cost | Amount |
|---|---|
| Down payment | $0 |
| Upfront fee | $2,500 |
| Annual fee | $875/year ($73/month) |
USDA’s annual fee (0.35%) is much lower than FHA’s MIP (0.55%), making it cheaper long-term for eligible buyers.
State and Local Programs
Beyond federal programs, most states offer additional assistance:
- Down payment assistance grants — free money that doesn’t need to be repaid
- Low-interest second mortgages — for down payment and closing costs
- Tax credits — reduce your federal tax bill for mortgage interest paid
Check your state’s housing finance agency for specific programs. Every state has different offerings.
Which Program Should You Choose?
- Credit under 680, small savings → FHA loan
- Veteran or active military → VA loan (best deal, always)
- Rural/suburban area, moderate income → USDA loan
- Credit 680+, 5%+ down → Conventional loan (PMI removal advantage)
Calculate Your Payment
Use our PITI calculator to compare monthly payments under different loan programs. Adjust the interest rate and PMI to match each program’s terms.
Related
- FHA vs Conventional Loan — detailed side-by-side comparison
- What Is PMI and How to Avoid It
- How Much Down Payment Do You Need?
- 10 First-Time Home Buyer Mistakes