When a first time home buyer ventures into the real estate market, the terminology alone can be overwhelming. There are many details to be considered, and the magnitude of a home mortgage loan can be frightening. However, government guaranteed mortgage loans are helpful options for the newcomer to the experience of buying a house, and provide assistance in a number of ways.

Government guaranteed mortgages are helpful to home buyers, in that there are manageable terms for buyers who otherwise might not be able to afford the costs associated with obtaining a mortgage. The down payment requirement, for example, is significantly less in the case of an FHA loan, with as little as 3.5% of the loan amount needed. Conventional mortgages, on the other hand, involve greater down payments. As much as a 20% down payment can be required with a conventional loan, which is unattainable in the short term for young or low income individuals interested in buying.

Additionally, qualifying for a government backed mortgage allows the purchaser to receive lower interest rates than those associated with conventional loans. Credit scores determine qualifications for interest rates and loan terms, as well. In the case of a federally guaranteed mortgage, credit score requirements are less stringent.

The guidelines for loans place significant restrictions on the source of the borrower's down payment. However, in the case of the federally guaranteed home mortgage, down payment assistance can be provided by family members of the borrower, in the form of gifts. Sellers may not contribute to down payment funds. However, sellers are able to agree to gift assistance programs being used in order to help the borrower with the down payment, when a government backed mortgage is involved. Additionally, the seller may contribute to the buyer's closing costs in this type of loan.

Loans backed by the federal government also carry incentives for lenders, due to mortgage insurance. The borrower's monthly payment includes a mortgage insurance premium. The lender, in the case of a government guaranteed home mortgage, is assured of recovering a portion of costs if the borrower defaults on the loan. The mortgage insurance premium remains in effect throughout the course of the loan.

Home construction and sales impact the economy, and society as a whole. Lower income buyers, as well as first time buyers, invest in communities, when they invest in owning a home. Federally guaranteed mortgages provide incentives to buyers, sellers, and most importantly, to lenders, making these loans beneficial to all parties involved.