There are two types of government mortgage loans that must be addressed, FHA loans and VA loans. Farm loans are not discussed, as they are specialized, and if you are looking to finance the purchase of a farm, you should seek advice from a local bank near the farm.
The government mortgage loans are not really loans from the government. Instead, a government agency insures or guarantees a loan made by a private lender. These are loans insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA).
The purpose of these governmental programs is to facilitate home ownership for those moderate or low-income families who do not have the ability, usually the down payment, to qualify for a conventional loan. The insurance or guarantee takes away the lenders’ risk of loss, allowing them to make loans with as little as 3% down for FHA-insured loans and zero down for VA guaranteed loans.