A private lender, such as a bank or credit union, gives you the loan without insurance from the government. This is what allows the lender to offer you more favorable terms, such as a lower rate or more flexible credit requirements.Ī conventional loan is not guaranteed by the government. When a lender gives you a government-guaranteed mortgage, it's like the lender is getting insurance on your loan. If you default on a mortgage that's backed by the government, the agency pays the lender on your behalf. These types of loans aren't direct loans, meaning you don't apply for a government-backed mortgage directly through the government agency - you apply through a private mortgage lender that offers FHA, VA, or USDA loans. You may qualify for a mortgage backed by the Federal Housing Administration (which is part of the US Department of Housing and Urban Development), US Department of Agriculture, or the US Department of Veterans Affairs. Government-backed mortgage definitionĪ government-backed mortgage is a home loan that is insured or guaranteed by a federal agency. If you have a low income, poor credit, or are a first-time homebuyer or veteran, one of these mortgages could help make homeownership possible for you. Government-backed mortgages were created to promote homeownership by making it more affordable. When you apply for a mortgage, you'll have to decide between two basic types of loans: a government-backed mortgage and a conventional loan. By clicking ‘Sign up’, you agree to receive marketing emails from InsiderĪs well as other partner offers and accept our
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