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Guide to Government Home Loans in 2022

Read Time: 3 Minutes April 07, 2022

If you’re thinking about beginning the home search but aren’t quite sure if you’ll qualify for a conventional loan, don’t fret. Government home loans exist with more flexible underwriting standards, and they are often more affordable than other options. Consider this your guide to all things Government Loan.

Young government professionals

What is a Government Backed Mortgage?

A government backed mortgage is a loan that is insured by the U.S. federal government. There are many different types, each with their own specific requirements and intended users. They are a good option for many homeowners because they are usually extremely reasonable in terms of affordability and offer homeownership options for people who may have limited options.


How do Government Loans Work?

Once you have a specific loan type in mind, you’ll have to do more research on how to apply. Government home loans are always issued by the lender, not the government themselves; the government just insures the loan. There are other types of government loans however, like educational loans, that are issued by the government themselves. When it comes to government home loans, you will likely start with some form of online application. For example, you can apply for a VA loan with Newrez here.


Types of Government Mortgages

There are a few types of different government mortgages available for different categories of people. This article will cover most of the major ones, so take notes and see where you fit in.


FHA Loan

The first type of government mortgage, FHA loans, are backed by the Federal Housing Administration, which allows them to have lower credit requirements and down payments. Specifically, FHA loans require a down payment of 3.5% and while each lender has their own credit score requirements, Newrez has a minimum credit score of 580 for these types of loans. With an FHA loan, mortgage insurance is usually required.

If you’re looking to buy a fixer-upper, an FHA 203K loan may be your perfect fit. Picture this: you found the perfect house to turn into your dream home, but then you start getting into the nitty gritty of how much remodeling will cost and you realize you can’t afford it on your own. So, you decide to apply for a loan, but the lender won’t approve it because the house is considered “uninhabitable” in its current condition. Or maybe the house is well enough off that you can get a loan, but you still aren’t sure you’ll have enough money to do all of the repairs.

If this sounds like you, an FHA 203K could be exactly what you’re looking for. Also backed by the federal government, this loan type allows homebuyers to buy damaged or older homes and include the price of the necessary renovations in the loan amount. If this sounds like it could be for you, there are resources available with more detailed information about what kinds of properties qualify, which home repairs qualify, how much money you can get, and provisions that many FHA 203K loans include.


VA Loan 

If you’re a veteran, current military personnel, or surviving spouse of a service member; a VA loan may be a good option for you. These loans are backed by the U.S. Department of Veterans affairs and come with a few perks that make it easier for these groups to qualify for a mortgage. The VA itself has no minimum credit requirement, but individual lenders do have their own minimum requirements. With most lenders, you would need a credit score of at least 620 to qualify for a VA loan, but Newrez goes as low as 600 with no down payment, or 560-599 with a required 5% down payment. Another plus of a VA loan is that they do not require private mortgage insurance. The main thing that you will need to provide for this type of loan is a certificate of eligibility (COE). If you’re curious about more in-depth requirements, check out our VA Loan Guide.



Although they are only available to fairly select group of potential properties, USDA loans can be a great option if you are low-to-moderate in income and intend to live in a rural or less-populated suburb. This means that not all properties are eligible, so check out the USDA’s Eligibility site to learn more. Perks of this loan type? There are no down payment requirements, no maximum home purchase price, and interest rates are often lower than any other mortgage type. Even more, things like eligible home repairs and improvements, and some upfront fees can be included in the loan amount. It is worth noting that a USDA loan will sometimes require mortgage insurance.



If you are a Native American veteran who wants to buy, improve, or build a home on Federal Trust land, a Native American Direct Loans (NADL) may be for you. Similar to a VA loan, you will need to obtain a COE from your tribal organization for this type of loan. In most cases, there is no down payment requirement and no need for mortgage insurance. NADL loans also typically offer low interest rates and limited closing costs.


Can I Refinance from a Conventional Loan into a Government Loan?

Good news: in general, when you refinance any type of loan, you don’t have to stick to the previous loan’s type. If you currently have a conventional loan but you qualify for a government backed loan, it is entirely possible to refinance into many government loans. Refinancing a conventional loan into an FHA loan, for example, can be a great option for homeowners who want to refinance but don’t have a great credit score. And an added bonus: your rate could potentially be lower!


FHA Streamline Refinance

While it is possible to refinance a conventional loan into a government loan, it is also possible to refinance and still keep your loan type. If you currently have an FHA loan and are looking to refinance, an FHA streamline refinance is a great option. Quick and efficient, this option has reduced credit and underwriting requirements, no income or employment verification, and no appraisal is needed. Closing costs are not included in the loan amount but they can be offset by lender credits that may be offered. To be eligible for this type of refinance, you must have had your FHA loan for at least 6 months and all your payments must have been made on time for that period of time. FHA streamline refinances can only be used for first residences.



The VA IRRL, or VA Interest Rate Reduction Loan, is a mortgage refinance option for qualified VA borrowers that have an existing VA loan. This option allows veterans to either refinance into a new VA loan with a lower interest rate or convert their adjustable rate VA loan into one with a fixed rate. This can be a great option if you’re looking for something with little to no out-of-pocket fees because there is often no VA appraisal requirement, a lower VA funding fee than for typical VA purchase and cash-out loans, and you can even opt to roll all closing costs and fees into the loan balance.


First-Time Homebuyer Programs

This is another stellar option to consider if you are a first-time homebuyer. Typically, first-time homebuyer programs are offered at the state/city level, so take a look at what is available in your area. For instance, if you live in Texas you can find many of the programs that may be available to you here. The benefits of each program vary.


What is Down Payment Assistance?

Unless your loan type requires no down payment, when you’re buying a home, you will typically have to put down a minimum percentage of your home’s purchase price in the form of a down payment. As you’ve read, this specific percentage can vary by loan type. Many first-time homebuyers find it difficult to save up for a down payment, so if you’re in this boat, you have options.


Meant to promote more widespread homeownership, there are publicly and privately funded programs called down payment assistance programs that are available to first-time homebuyers to help them cover down payments and closing costs. With these programs, funds are administered by cities, counties, housing finance agencies, nonprofits, lenders and other groups, and in some high-cost areas, even employers. In total, there are over 2,000 different down payment assistance programs in the USA, so odds are there is one that is the right fit for you, but it might take some research to find. You can begin your research by searching programs by state here. The qualifications vary by program, and many are designed for specific groups like low-income applicants, educators, or healthcare workers.


These funds can be available as low or zero interest loans, tax credits, or even grants that don’t need to be paid back.


Learn more in our other educational series.

We’ve assembled a treasure trove of jargon-free information to demystify home-financing and arm you with valuable insights and actionable options.

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