While an FHA loan is an excellent option from some borrowers, it is not the only available government-backed loan program available. If you are seeking to purchase a fixer-upper home, or, to repair/renovate your current home, you might want to consider an FHA 203K loan. This type of loan is also approved for refinancing a home involving home improvements.

Essentially, once approved, your home repair or improvement costs are wrapped into your total loan amount. Typically, a home improvement loan is taken out separately from an original mortgage loan. In such cases, borrowers must then pay two monthly installment payments and APRs on both loans. The FHA 203K program creates one home loan interest rate for both home improvement and home purchase purposes, which potentially saves you thousands of dollars in interest every year.

An FHA 203K loan is purposed to fit specific needs. A minimum of $5,000 and maximum of $35,000 are permitted to be financed through this type of loan. This means if your needed home repairs cost only $4,900 or exceed the $35,000 limit by only $100, they will not be approved. Exceptions might be made but numbers outside the $5,000 to $35,000 range are outside program guidelines and typically not approved.

Another 203K loan condition pertains to your place of residency. These loans are not approved for rental or investment property purchases. You must intend to live in the home you purchase with FHA 203K loan funds for the loan to be approved. This means consumers earning a living flipping homes are not eligible for this type of government-insured loan program.

FHA cash-out refinance loans are available to homeowners with FICO scores of 580 and higher. These loans differ from FHA rate-and-term refinance loan programs in that they do not require homeowners to already possess an FHA-backed loan. Down payment assistance (DPA) loan programs offered via HUD help borrowers who are unable to generate enough of a down payment on their own to still purchase new homes.

The government sponsored Energy Efficient Mortgage program (EEM) permits approved applicants to borrow an additional $3,500 on top of their original FHA loan to assist in paying for home-based energy system expenses. Solar panels, insulation, new thermostats and HVAC systems are all approved purchases through the EEM loan program.

The U.S. Department of Agriculture (USDA) considers specified areas of the country as rural areas. People living in such areas and seeking to purchase a new home with a government-backed loan might qualify for a USDA loan. The U.S. Department of Veterans Affairs (VA) also provides home mortgage loans to active or veteran qualified U.S. service members and their spouses. These loans tend to offer favorable terms in honor of the services provided to this country by approved applicants.