A government-backed loan is a loan subsidized by the government, which protects lenders against defaults on payments, thus making it possible to lenders to offer potential borrowers lower interest rates. Its primary interest is to make home ownership affordable to lower income households and first-time buyers .
There are many types of government-backed loans, which vary depending on the country and status of the borrower. Arguably, the most widely known type of government-backed loan is the US Federal Housing Administration FHA loan , in existence since 1934.
Other types of government-backed loans include the following:
- American Dream Downpayment Initiative – ADDI
- Good Neighbor Next Door
- HOPE VI
- Teacher Next Door Program
- VA loan
- State of New York Mortgage Agency – SONYMA