What is the difference between a subsidized and unsubsidized loan?

Whether you are looking to enroll in college or purchase a home, it is important to know the difference between a subsidized or unsubsidized loan. In both student loans and homeowner loans, there are two options.

Both have qualifications that need to be met in order to participate. A person must be able to show that he has enough income to make the house payment and be responsible for the rest of his debt. He also needs to have a credit score that is compatible with the financial institution’s lending plan.

While you may be able to pay for clothes, entertainment and maybe even a car with cash, there are some expenses that require you to get a loan. For most people, purchasing a home falls into this category.

You can give some money upfront in the form of a down payment in order to show that you are serious, but the rest needs to be financed. You need to find a lender that will hold your debt as you make payments for the cost of the home.

At this point you begin to realize that there are different options to choosing homeowner loans. There are several benefits to qualifying for a subsidized home loan. In fact, many people start their search for a home loan looking only at the subsidized options.

What does subsidized mean for potential home buyers?

The government is just one entity that subsidizes loans. They ask for less of a down payment, which makes it easier for many people to become homeowners. In fact, a VA loan is just an example of a subsidized loan. Here, potential homeowners will not have to put any money down.

Depending of the specific program you are applying, for you will need to meet certain qualifications. You will need to have a certain income to ensure that you will be able to pay your mortgage. This is the same with most loans. However, some of these special options may take the cost of the property as well as the location of the property into consideration.

What if I am a first time home buyer?

If this is the first time that you have purchased a home, you may qualify for one of the subsidized homeowner loans. It is important to collect all of the documentation and records that you will need before proceeding. Consider checking online to find the latest rates as well as the best homeowner loans available for you.

 What does unsubsidized means for potential home buyers?

An unsubsidized loan is also called a conventional loan. In this situation, there is no assistance with the down payment or a lower interest rate. You work to get a loan from a financial institution. It takes an approval process and you will need to be able to show that you can make your payments each and every month when the mortgage comes due.

Which loan should I choose?

When you begin looking into buying a home, start by looking for a subsidized loan first. They will give you a boost and make purchasing a home a little easier.

Remember that you may have to present less money up front and your interest rate may be a little lower. The more you know about what it takes to qualify as a person, as well as the types of homes that qualify, the better off you will be in the decision making process.

If you don’t qualify, don’t worry. That doesn’t mean that you can never be a homeowner. It does mean that you will need to save up a little more and shop around for a home within your price range.

Guest post by MSM

9 Responses to What is the difference between a subsidized and unsubsidized loan?

    • There may be low hanging free money out there! I am not for them being there, but if they are everyone should go for it

  1. Hmm..some great tips and clear explanations about subsidized and unsubsidized loans! Very helpful. Enjoyed the explanation.

  2. It’s really good that the government provides a subsidized option for those who want to own but need assistance. Hopefully potential home buyers will remember that they need to have substantial savings before buying a home so we don’t have a repeat of the past few years.

    (By the way, I’m blocked from your site at work. Apparently it has my IP blacklisted. Any clue how I can fix this?)

    • I feel like subsidized option may have been how we got ourselves into trouble in the first place…with loans and homes going to people who couldn’t afford them.

      • Same here. Maybe there should be a required course before someone can qualify for a subsidized loan. Kind of how a driver’s license test is required for new drivers.

  3. I knew there were subsidized and unsubsidized student loans, but I didn’t know they were also available for home loans. Thanks for the clarification and explanation in the post.

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