Can't Get Approved For Debt Relief Grants? Try Applying for a Federally Backed FHA Grant

If you hit the search engines for debt relief grants, you'll see a lot of dot-coms but no dot-govs; the FTC has had to shut down a lot of scams promising debt relief grants from this winter's stimulus package. There are plenty of grant monies to be had, but they generally apply to local governments and non-profit agencies, not individuals needing help staying financially afloat.

There is one forgotten aid to would-be homeowners that not only predates the Obama administration but predates Obama himself; the FHA loan. While the current stimulus package is design to fight what has been questionably called the worst economy since the Great Depression (the stagflation era of the late 70s-early 80s was worse than now), the FHA came out of the New Deal reforms that tried to fight the Great Depression of the 1930s.

That relic of the New Deal allows homeowners with decent credit to buy a house with only 3% down; normal mortgages require at least 10% down, as the low-down-payment "sub-prime" mortgages dried up after the financial meltdown of late 2008. You can even roll closing costs of up to 6% of the house's value into the mortgage.

FHA loans are insured by the FHA but not issued by them; you get the mortgages from banks, who apply for the FHA guarantees. One drawback of that process is that it often takes a month or more for the FHA paperwork to be processed, so would-be borrowers (and the folks selling the house) will need patience in letting the paperwork take its course. Some sellers that might be in a hurry might be taken aback by a buyer looking for a FHA loan.

For veterans, VA loans can be a similar option, with the VA picking up the cost of the mortgage insurance for disabled vets and insuring able-bodied vets at a reduced cost.

It's not free money, but it's help in getting mortgages with smaller down-payments that you can get on your own. If you could get the paperwork done by November 30th, you might qualify for the 10% new homeowner tax credit as well.

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