Government Home Loans And More: A Guide For First-Time Borrowers (2024)

USDA Loans

USDA loans are government-backed loans that can help you buy a home in a suburban or rural area. USDA loans don’t require a down payment, but you usually must have a credit score of at least 640 to qualify. The home you want to buy must also be in an eligible rural area; you can check your potential home’s eligibility on the USDA website.

Rocket Mortgage doesn’t offer USDA loans at this time.

Government Loans For Veterans

In addition to home loans, a few other types of VA loans are available for veterans through the Department of Veterans Affairs.

Interest Rate Reduction Refinance Loan (IRRRL)

If you have a VA home loan and would like to lower your monthly payments, an IRRRL, also called aVA Streamline Refinance, can help you refinance with a lower rate. Depending on your loan’s terms, an IRRRL can give you a lower interest rate or a lower monthly payment.

If you’re switching from a different lender to refinance with Rocket Mortgage, you’ll need a minimum credit score of 600 for an IRRRL.

VA Cash-Out Refinance

Cash-out refinance programs allow you to utilize the equity you’ve built in your home. With the VA cash-out refinance program, you can refinance your VA home loan and extract cash from your home’s equity. There are no restrictions on how you use your cash, but common uses include removing liens, paying off higher-interest debt or making home improvements.

One of the major benefits of a VA loan is that it’s the only one that allows you to take out up to the full amount of your home value. Rocket Mortgage requires a 620 qualifying FICO® Score when you do this. Otherwise, you have to leave at least 10% equity in the home after taking cash out.

Veterans’ Life Insurance Policy Loans

If you’re a veteran who served in the Vietnam War, Korean War or World War II, you may have a government-issued permanent life insurance plan. A veterans’ life insurance policy loan allows you to borrow up to 94% of your policy’s value in cash or surrender your policy for its cash value.

Government Education Loans

The federal government offers many loans and grants that can help you pursue a college degree or research in a needed area. For most types of education loans, you’ll start by filling out and submitting the FAFSA^Ⓡ online. You can also find a paper copy of the FAFSA^Ⓡ at your local library or postsecondary school.

Direct Subsidized And Unsubsidized Loans

Direct subsidized and unsubsidized loans are two types of low-interest student loans offered through the Department of Education to help cover the cost of college or career school.

Direct subsidized loans are available for undergraduate students to attend a 4-year or 2-year college, technical school or trade school. These loans are only for students who demonstrate financial need. The U.S. Department of Education pays the interest while you're in school at least half-time, the first 6 months after you leave school and during a period of deferment. Annual loan limits apply.

Unlike direct subsidized loans, direct unsubsidized loans aren’t awarded based on need. Instead, they’re awarded based on the cost of your tuition and other financial aid you need. Direct unsubsidized loans begin accruing interest as soon as you take out the loan. Annual loan limits apply.

Direct PLUS Loans

Direct PLUS loans are unsubsidized loans that the U.S. Department of Education funds. Interest begins accruing immediately on Direct PLUS loans. Graduate or professional students and parents of dependent children in college can take out these types of loans.

Your credit should be in good standing if you want to take out a Direct PLUS loan. If you have an unfavorable credit history, you may still be able to receive a PLUS loan if you meet additional loan requirements. The maximum PLUS loan amount you can receive is the cost of attendance minus any other financial aid received.

Direct Consolidation Loan

This allows you to take all of your existing loans through the Department of Education and consolidate them into a single loan with one payment. There is no application fee for this.

Government Business Loans

If you aspire to be a small business owner, a government loan from the Small Business Administration (SBA) can give you the funds you need to get off the ground. As with housing loans, the government doesn’t directly issue business loans. Instead, you apply through your bank or lending service, and the government guarantees the loan.

If you’re thinking of applying for both a mortgage and a business loan, be sure to make the proper preparations.

7(a) Small-Business Loan

A 7(a) loan is the most basic type of small-business loan, and it can be used for a wide range of purposes. 7(a) loans are designed for small, for-profit businesses that can’t get loans from other channels. You can receive up to $5 million with a 7(a) loan.

CDC/504 Loan Program

CDC/504 loans are for specialized small-business owners who want to purchase or upgrade their commercial facility. Corporate development companies are nonprofits that issue and guarantee 40% of your CDC/504 loans. Your bank lends 50%, and you must put 10% down. You can get up to $5 million (up to $5.5 million for certain energy projects) with a CDC/504 loan.

SBA Microloans

SBA Microloans are small-business loans with shorter terms and smaller maximums than 7(a) loans. Microloans are only for new startups and small businesses, and you must pay them back in no more than 6 years. You can get up to $50,000 with an SBA Microloan, and the average loan size is $13,000.

Government Disaster-Relief Loans

If you live in an area declared a disaster zone, you have access to low-interest disaster-relief loans from the SBA and the Federal Emergency Management Agency (FEMA). Disaster-relief loans have long loan terms – up to 30 years – and low interest rates. Let’s take a look at your options for natural disaster relief below:

Home And Property Disaster Loans

Home and property disaster loans can help pay for home damage that insurance doesn’t cover after a declared disaster. Homeowners can apply for up to $200,000 to rebuild their homes after a natural disaster, plus an extra $40,000 to replace lost possessions. However, you can’t use these loans to upgrade your home or build more structures that weren’t there before the disaster.

Economic Injury Disaster Loans

If you own a small business or non-profit that’s in a declared disaster zone, the Economic Injury Disaster Loan program (EIDL) can help you rebuild. An Economic Injury Disaster Loan can give you up to $2 million to repair your business. Similar to a home and property disaster loan, Economic Injury Disaster Loans can’t go toward renovations or upgrades.

It’s important to note that the $2 million Includes both these loans and the physical disaster loans mentioned above. If you’ve used a physical disaster loan, the amount you can get through an EIDL will be lowered by the amount of that loan.

Government Agriculture Loans

Farmers, ranchers and other agricultural experts can get low-interest loans from the federal government, funded by the USDA and the Farm Safety Agency (FSA). You can apply for most agriculture loans at your local USDA service center.

Farm-Operating Loans

Farm-operating loans are for family farmers or ranchers to build or sustain their farms. The FSA guarantees farm-operating loans from commercial lenders and services its own loans. You can get up to $1,825,000 with a guaranteed farm-operating loan Direct loans have a limit of $400,000. Most loans have a repayment term of up to 7 years.

Farm-Ownership Loans

If you want to buy a new farm or ranch, a Farm-Ownership Loan is the loan for you. You can qualify for up to $1,825,000 with an FSA guaranteed ownership loan, or you can get $600,000 in many cases with an FSA direct loan. Farm-Ownership Loans are long-term loans with a maximum repayment term of 40 years.