The government offers various types of home loans to low-income applicants and those struggling to secure traditional mortgages. Typically, these loans fall under the jurisdiction of three federal bodies; The Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA) and the Department of Veterans Affairs (VA). HUD, FHA and VA loan programs assist applicants in purchasing, refinancing or building homes by granting them access to special financing programs.

The FHA is part of the HUD housing department and has grown to be the largest mortgage insurer in the world. Although FHA home loans are managed by HUD, the entity is self-funded and does not rely on funds from the housing department. Therefore, the term HUD loan generally refers to mortgages insured by the Federal Housing Administration but run through the Department of Housing and Urban Development.

These departments do not typically lend money themselves. Instead, the FHA and VA guarantee loans offered by third-party mortgage companies. By insuring loans, these departments are able to lower the costs associated with borrowing large amounts of money needed to purchase a house. In some cases, HUD, FHA and the VA offer direct loans, financial assistance or payment-relief programs to eligible applicants.

Types of Home Loans

The type of home loan available to a particular buyer depends on his or her financial status and the circumstances of the purchase. There are programs available to help applicants buy, build, repair, rehabilitate or refinance a home. It is easier to understand the different types of loans available through HUD, the FHA and the VA by categorizing them within each department.

What is an FHA home loan?

In order to apply for an FHA loan, you must meet the FHA income loan requirements and submit an application through HUD. FHA loans are insured by the Federal Housing Administration and vary based on the financial needs and housing circumstances of each applicant. Types of FHA loans include the following:

  • First-Time Buyer FHA Loan – First-time buyers can qualify for low down-payments, low closing costs and low-interest rates on third-party loans. However, applicants must use the FHA loan calculator to ensure they meet certain credit and income requirements before applying.
  • Reverse Mortgage Program – This type of loan allows seniors aged 62 and older to convert part of their property’s equity into cash.
  • FHA 203(K) Loan – This loan is a type of mortgage insurance. It allows homeowners to combine the cost of purchasing or refinancing a house with the cost of rehabilitating it into one simple loan.
  • Energy-Efficient Mortgage – Homeowners who meet all of the FHA’s loan qualifications can utilize the department’s energy-efficient mortgage when upgrading an existing home.
  • Manufactured Housing Loans – The FHA has specific loans for mobile and manufactured housing if an applicant is unable to secure a cost-effective mortgage for this type of property.

How to Buy a HUD Home

HUD foreclosed homes purchased using an FHA loan are recollected by HUD and sold to the public. The HUD home store allows potential buyers to view any available properties currently on sale through this program. FHA-insured mortgages can be used to purchase HUD homes for sale across the country.

However, direct loans are not issued by HUD to purchase these properties. Alternatively, the department offers several loan programs to help homeowners avoid foreclosure and meet monthly payments. Some of these loan programs include the following:

  • Home Affordable Modification Program (HAMP) – Eligible applicants can receive a 40 percent drop in mortgage payments when successfully enrolled in this program.
  • Home Affordable Refinance Program (HARP) – Applicants may use this program to refinance properties that are valued lower than the amount owed on an active loan.
  • Principal Reduction Alternative (PRA) – Under this program, the HUD housing department encourages servicers and investors to lower the amount owed on a property if it is worth less than the total amount of the loan; helping homeowners to avoid foreclosure.
  • Second Lien Modification Program (2MP) – Certain homeowners with second mortgages or who have already hit FHA loan limits, may apply for a 2MP to avoid defaulting on a loan. 
  • Home Affordable Unemployment Program (UP) – This program allows eligible, unemployed homeowners to suspend their mortgage payments for up to 12 months while looking for work.

The department also lists heavily discounted HUD houses for sale through its website. Qualifying teachers and emergency personnel such as law-enforcement officers and firefighters can buy properties through the Good Neighbor Next Door Sales Program at 50 percent of the cost. Participants must sign a silent, second mortgage listing the discounted price and live in the home for at least 36 months to qualify.

Learn About VA Home Loans

A VA loan can help veterans and surviving spouses buy, build, repair or retain residential properties. Applicants must meet all VA loan eligibility requirements to apply. Below are the four main types of VA loans available to eligible servicemen, each focusing on specific issues faced by veterans and their surviving spouses:

  • VA Purchase Loans have competitive interest rates, no down-payments or mortgage insurance. Veterans can use the departments VA home loan calculator to better understand what benefits are available to them based on their completed service.
  • Cash-Out Refinance Loans allow applicants to remove equity from their property and use it on other financially pressing issues, such as paying off debt or covering school fees.
  • Interest Rate Reduction Refinance Loans (IRRRL) help veterans lower the VA home loan interest rates by refinancing existing mortgages.
  • Native American Direct Loan (NADL) Programs issue loans directly to eligible veterans wanting to buy or build properties on Federal Trust Land. This program also helps lower the interest rates of current VA loans.
  • Adapted Housing Grants assist disabled veterans who meet specific VA home loan requirements in purchasing or adapting properties to better accommodate their disability.


The VA does not offer direct loans. Instead, the department partially guarantees loans issued by private banks and mortgage companies. This allows the lender to offer lower VA loan rates and smaller down-payments to consumers.