USDA Rural Housing

 Zero down mortgages have practically vanished these days. But there is a little known mortgage program that still offers a zero-down mortgage that’s readily accessible to most borrowers with no mortgage insurance and low rates.

 USDA rural development loans are home loans guaranteed by the U.S. government and are often overlooked by many lenders and mortgage brokers as a mortgage option for borrowers.

 100% Financing

 A USDA rural development home loan offers some very irresistible terms. You are able to get 100 percent financing (no down payment) and pay no private mortgage insurance (PMI) on your mortgage!  Credit requirements are moderate - you can qualify with credit scores as low as 620 - and there is no limit on seller paid closing costs or gift funds from family members for closing costs.

 Additionally, you are also able to roll in financing to pay for fixing up or needed upgrades to the property, financing up to 102 percent of the “improved” value of the home as part of the mortgage.

 No Private Mortgage Insurance

 In addition to not paying private mortgage insurance (PMI), which is usually needed for mortgages wherever the borrower invests less than 20 percent down. Rather, the borrower makes an upfront fee equal to 2 percent of the loan total. Since PMI has an yearly cost usually comparable to approximately one-half of one percent of the loan balance, you will make out better with the USDA loan if you live in your house for four years or more.

 All USDA loans are standard fixed-rate mortgages, so you do not have to be worried about adjustable rate mortgages (ARMs) and rates are comparable to  what you would get with a conventional mortgage.

 USDA Approved Areas

 The program is intended for “rural” areas, which a lot of people assume means agricultural areas. But actually, the loans are commonly available in areas outside of city limits - the small towns and communities where many people choose to live.  You would be very surprised at how many places are available for USDA mortgages.  If you would like to find out if your area is in a USDA zone, contact us and we can narrow down the areas for you that fall into USDA lending zones.

 Income Guidelines

 The USDA mortgage program has income restrictions on borrowers. The limit is 115 percent of the average family income for where you are buying, then adjusted for family size.  If you are unsure if you earn too much feel free to contact us and we can do the calculations for you.

 With lending standards tightening it has become harder to qualify for a standard mortgage with a small or no down payment.  If this applies to you then the USDA Rural Development mortgage program may be the best alternative when financing your new home.