Government Mortgages

• Three major government mortgage programs exist. The most popular is the Federal Housing Administration (FHA) loan program. FHA requires a down payment of only 3.5 percent as of April 2011. Most banks and large mortgage lenders received approval from FHA to provide their programs. The Department of Veterans Affairs (VA) provides a home loan guarantee program for both active service members and veterans. This home loan guarantee program allows eligible borrowers to purchase a home without any down payment. The Department of Agriculture (USDA) provides mortgage assistance to low- and moderate-income homeowners living in rural areas.
  
  

Rate and Term

• Mortgage lenders often provide a rate-and-term mortgage refinance program. Rate-and-term refinance programs allow the homeowner to change the type of mortgage, the amortization period of the mortgage, the interest rate for the mortgage or a combination of the three. Often a rate-and-term mortgage limits the amount of money a homeowner may receive at closing, but normally allows the homeowner to finance the closing costs.
  
  

Cash-Out

• FHA and VA both offer cash-out refinance options. FHA limits the amount the homeowner may borrow when obtaining a cash-out refinance to 85 percent of the home's value. VA limits the loan amount to 90 percent of the home's value. The homeowners may use the funds received from a cash-out refinance to make improvements on the home, pay off debt or for any other reason.
  
  

Streamline Refinance

• FHA provides current FHA mortgage holders with an option to obtain a streamline refinance. VA has a similar program available to holders of VA mortgages called the Interest Rate Reduction Refinance Loan. Both of these loan programs work similar to rate-and-term refinance mortgages. One major difference is if the new loan amount does not exceed the borrower's current loan's maximum balance, then the borrower does not have to purchase an appraisal or provide the lender with proof of income. The new loan must also provide a clear benefit for the borrower, such as a lower payment or a more conservative loan type.