What Type of Financing Is There Besides FHA for Houses?

A conventional mortgage is a loan between you and a private lender, such as bank, and is not insured by a government agency. Most home purchases are made using conventional mortgages. If your credit score is average or better than average, you can likely secure a conventional mortgage with a reasonable interest rate. Borrowers with poor credit may have difficulty securing a conventional mortgage. Putting up a large down payment can improve the chances of getting approved for a mortgage.

The U.S. Department of Veterans Affairs has a loan insurance that is similar to the FHA loan program. Veterans of the armed forces may apply for a certificate of eligibility for VA loans by filling out VA Form 26-1880 and submitting it to the VA Atlanta Eligibility Center along with proof of military service. VA loans can help veterans and their families afford homes even if they have low income or imperfect credit.

The U.S. Department of Agriculture and Rural Development offers home loan programs to help low-income and middle-income borrowers afford homes in rural areas. To be eligible for a guaranteed RD loan, you must live in a rural area and your income may not exceed 115 percent of the median for the local area. Loans are also available to very low-income families who own homes and need extra money to rehabilitate them.

Rent-to-own is a financing option that can help buyers with below-average credit to purchase homes. Under a rent-to-own agreement, you negotiate with a seller on a price for a home, but instead of buying the home outright, you rent the home for 12 to 36 months. A portion of your rent accrues as a down payment on the home and after the rental period, you may buy the home at the originally negotiated price or walk away. Walking away after the rental period can be costly, however, because you forfeit any initial down payment and accrued rent.