Guest Author - Rosemary Rugnetta

So many people made the decision in the past couple of years to purchase or refinance a home using subprime lenders when in fact they could have opted for an FHA or VA loan.

FHA and VA loans that are backed by the government. FHA is Federal Housing Administration and VA is Veteran's Administration. In the past, FHA was created to make affordable housing available to low to average income borrowers. It was used to encourage home ownership. VA is a military benefit and is available only to those who are active or inactive military. Both are great programs that are available to people so that they could afford home ownership.

FHA is helping people today who are struggling with their subprime or adjustable rate mortgages. They are actively refinancing them. But there is a very significant change that has taken place with FHA today. At one time, FHA was not credit score driven which means that they did not look at credit scores in order to approve the loan. Today, that has changed. The minimum credit score now allowed with FHA is 580. Many people are being left out because of this issue. When purchasing a home, a down payment of three percent is what is required for an FHA loan. The loan will include an upfront mortgage insurance fee.

Since VA is for military only, active or inactive, there is a lot of additional paperwork and calculations that must be taken into consideration. But VA allows you to purchase a home without a down payment. They guarantee what is called an entitlement which covers the down payment portion of the loan. This type of loan will also include an upfront VA funding fee.

Just a couple of years ago, there were very few of these loans being closed whereas today they are on the upswing. Most of the loans closing today are FHA and VA loans. People need patience when applying for these loans because each one does require additional paperwork.

If you are in need of a loan, it is advisable to seek an experience loan officer who can do an FHA or VA loan. Not all loan representatives can do these. They must be approved to offer them.