To help support the real estate market across the country, the United States government has create a wide variety of programs and agencies. While you can certainly find a mortgage that does not include any government program, most mortgage loans will involve one or more.
To understand the best options for your mortgage, it helps to have a basic knowledge of the top real estate agencies created by the United States government.
Important Government Agencies and Programs for U.S. Homebuyers
Department of Housing and Urban Development (HUD)
One of the biggest, most powerful, and most influential government agencies relating to the real estate market is the Department of Housing and Urban Development, or “HUD.” This agency is a cabinet-level department, meaning it sits on the advisory board of the President of the United States. Although it oversees other offices, such as the FHA, it is actually a relatively-young department, having been established in 1965 by the administration of Lyndon B. Johnson.
HUD oversees different agencies, including the Federal Housing Administration and the Federal Housing Financing Administration. They also oversee a myriad of smaller offices, including the Office of Community Planning and Development and the Office of Fair Housing and Equal Opportunity.
While HUD is largely responsible for broad oversight and administration, they do provide some loan options directly. The Good Neighbor Next Door program, for example, provides home loan options to important public servants, including police officers, teachers, emergency medical personnel, and firefighters.
Federal Housing Administration (FHA)
The Federal Housing Administration, commonly called the “FHA,” provides mortgage insurance on loans that are provided by approved lenders. These lenders are found all throughout the United States. Although the FHA is now overseen by HUD, it’s history dates back to 1934, when it was created in an effort to stimulate real estate lending, which had gone stagnant during the Great Depression.
Many people will seek an “FHA loan,” but that term is a little misplaced. The FHA does not actually loan money for homes, but instead provides insurance to lenders who write loans that fit within the FHA’s specific guidelines, which can be changed to reflect current needs and the state of the market. The FHA gives lenders greater reassurance and allows them to provide loans that they might otherwise avoid.
The FHA doesn’t just provide support for original purchases. They also support financing options for home renovations. The 203(k) program provides lending for home improvements, allowing current owners to enhance and upgrade their property.
Federal Housing Financing Administration (FHFA)
Established in 2008, this is one of the newest real-estate agencies created by the federal government. The FHFA was part of the Housing and Economic Recovery Act, and it’s now responsible for the supervision and regulation of Fannie Mae, Freddie Mac, and the Federal Home Loan Bank System. They work to ensure that these government-sponsored enterprises operate in a safe and sound manner, ensuring that they provide a reliable source of funding for housing.
Fannie Mae also provides renovation mortgages through their HomeStyle program, an important option for potential borrowers seeking to make additions and improvements to housing. This program can be used to purchase a home and fund necessary changes to make the home livable.
United States Department of Agriculture (USDA)
The United State Department of Agriculture was founded in the midst of the Civil War by President Lincoln, who sought to organize and harmonize the creation and distribution of food to a war-stricken nation. The USDA is a federal executive department, but Lincoln called it the “people’s department” because of it’s importance to feeding the nation.
In an effort to stimulate rural development and improve agricultural areas, the USDA provides home loans through the Rural Development office. They offer loans, grants, and loan insurance for people purchasing homes in rural and agricultural areas.
The Office of Veterans Affairs (VA)
Although the VA was officially established in 1930 by the Herbert Hoover administration, the American tradition of supporting veterans dates back as far as 1636, when pilgrims at the Plymouth colony passed a law that made supporting disabled soldiers the responsibility of the colony. Administrative support for veterans has gone through multiple changes, but the 1930 action gave the federal government the responsibility to “consolidate and coordinate Government activities affecting war veterans.”
To improve the life of veterans, the administration provides many benefits, including support for home loans. Like the FHA, the VA does not create loans but merely provides guarantees to these loans.
Federal National Mortgage Association (Fannie Mae)
Founded in 1938, Fannie Mae was part of the New Deal intended to stimulate real estate buying. This is not exactly a government agency, but a government-sponsored enterprise. In fact, since 1968, Fannie Mae has been a publicly-traded company, just like Apple or General Electric.
While Fannie Mae is a company, their main role is to expand the secondary mortgage market, which is the sale of securities and bonds related to real estate. Essentially, it exists to stimulate the housing economy; it does this by purchasing and guaranteeing loans made by lenders, among other efforts.
Federal Home Loan Mortgage Corporation (Freddie Mac)
Like Fannie Mae, Freddie Mac is a government-sponsored enterprise. It was founded in 1970 in an effort to further expand the secondary market for mortgages. It also buys mortgages from the secondary market and pools them together, selling them as mortgage-backed securities. Because of the secondary market, there is more money available for mortgage lending, which opens opportunities for more borrowers.
Local Real Estate Programs
While the federal government does a lot of work to stimulate and maintain the national housing market, there are also state and local governments that attempt to support the real estate market in their areas.
California, for example, has the California Housing Finance Agency, of CalHFA. This agency has supported the needs of home buyers since 1975 by providing affordable renting and home-purchase options to qualifying individuals and families.
Check with your local and state governments to see what housing options are available to you.
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