Affording necessities can become quite the ordeal in times like these, and those in lower-to-middle-class families tend to feel it the most.
However, things like a new home and higher education may no longer be out of reach, no matter how empty your pockets are.
The federal government has implemented dozens of loan programs, all of them dedicated to those in need.
The advantage of a federal loan is the fact that it’s significantly easier to qualify for.
There’s also the added benefit of it having better terms, and a wide variety of options for you to choose from.
Finding the right fit
As per usual, not every loan is intended to finance the same expense.
Just like a bank offers different loans for different things, the federal government has different programs to help people with different needs.
It is essential to carefully review the available options.
Some of the more popular loaning opportunities are:
- FHA Home Loans
- Section 504 Housing Repair
- Direct Unsubsidized Loans
- Direct Subsidized Loans
- Section 502 Guaranteed Loan
- VA Home Loans
Each of these options created by the federal government has its advantages and disadvantages, as well as different qualifications.
Make sure you’ve figured out your eligibility status for each of these before applying.
FHA Home Loans
The FHA Home Loan is an option made possible by the government, and the mortgages are insured by the FHA.
However, it is the private lenders that offer these mortgages.
The main reason so many are opting for this program is the fact that it offers lower down payments than the majority of standard mortgages you’ll find in the US, as well as incredibly flexible eligibility criteria.
Basically, it’s cheaper than the bank.
If your credit score is at least 580, which is still below average, your down payment requirement will be around 3.5%.
Those with a credit score between 500 and 579 will be paying up to 10% on their down payments.
This may sound like a massive spike at first, but if you consider that keeping your credit score at 580 level is fairly manageable, even in this economy, it doesn’t sound impossible.
Section 504 Housing Repair
This program gives eligible applicants access to $50k in assistance through loans and grants.
These make up the full amount in a 4:1 ratio, meaning that if you got the maximum amount, you’ll only have to return the $40k.
The program is more commonly known as the Section 504 Home Repair program and is made available by the USDA.
The program focuses on giving families that are struggling a chance to repair and modernize their homes.
This loan option is only available to qualifying individuals and families. The biggest benefit is that the loan portion of the assistance has a fixed interest rate of only 1%.
When it comes to the grant, it does not need to be repaid. Due to that fact, you don’t need to worry about an interest rate either!
What this really means is, the money comes in the form of a loan and a “gift”.
The loan is $40,000 and the “gift” is $10,000.
You don’t have to pay back the gift, but you do have to pay back the loan.
In order to apply, you should first contact the Department of Agriculture for any additional information on eligibility and other requirements for entering the program.
Direct Unsubsidized Loans
A contrast to the previous option would be the Direct Unsubsidized Loan Program, which is also funded by the ED.
You’ll find it’s applicable to any undergraduate, graduate, and professional student at an institution.
The maximum amount offered by this program is $20.5k per year, and just like the previously mentioned loaning option, your first step will always be filling out and submitting your FAFSA form.
Considering each program is regulated by a school’s financial aid office, they’ll be handling your payments and eligibility checks.
You’ll get the money, but you won’t be able to spend it as you wish.
This is why you should make sure you’ve familiarized yourself with the program before applying.
Direct Subsidized Loans
Direct Subsidized Loans, on the other hand, focus on educational purposes.
We all know how expensive education can get.
Direct Subsidized Loans give lower-income Americans a chance at pursuing higher education at a fraction of the cost.
This program was made possible by the Department of Education.
However, not everyone is eligible for this loaning opportunity, and it’s exclusive to those that can demonstrate their financial needs as undergrad students.
The Department of Education handles the interest rate under the following circumstances:
- The student is at least half-time in school
- Throughout the entirety of the grace period
- Through a deferment period
It’s also important to note that not everyone will be borrowing the same amount of money either, as a person’s specific loan amount is decided by their economic situation.
Those looking to make use of this loaning option should first fill out their FAFSA form and submit it to their local financial aid office, where they’ll inform them of their eligibility status in due time.
Any questions you may have about the Direct Subsidized Loan Program can be directed to your school’s financial aid office.
They’ll give you further directions on how to apply and retain your eligibility status.
Section 502 Guaranteed Loan
Another option that the Department of Agriculture offers is the Single Family Guaranteed Loan Program, or Section 502 Guaranteed Loan Program.
This loan program offers qualifying households lending opportunities.
It also lowers the amount of risk that lenders are usually facing, through a loan guarantee.
The good thing is – you won’t need any credit requirements, and nobody’s gonna ask you for a downpayment!
VA Home Loan Program
The US Department of Veterans Affairs offers this loan program to veterans, active members of the US Military forces, and their eligible spouses.
All of the previously mentioned individuals or groups are able to benefit from the loans provided by this program.
Through ensuring these loans, the US Department of Veterans Affairs (VA) can provide private lenders with less of a risk.
If you look at the guidelines for the VA program, you’ll find that the loan has no down payment requirement and no competitive interest rates, making it a highly desirable option for the average American.
While the VA has certain requirements for loan terms, it is possible that private lenders have the freedom to set their own requirements as well.
Therefore, it is important to carefully review the loan terms before accepting the loan.
In the end, no matter how difficult of a situation you think you’ve found yourself in, it’s more than likely that there’s a government program out there to help you out of a financial ditch.
With the internet age in full swing, finding this information is as easy as pressing a button.
Each of the loaning options presented in the article is designed with a specific group of individuals in mind.
This is why it’d be irresponsible for you to apply to any of them if you have no need for it, as you could be taking someone else’s much-needed spot in the program.
Naturally, you’ll be reaching out to different sources based on the loan you’re planning to take out.
With so many opportunities presented to you, finding the right fit for your financial needs should be a walk in the park.