Unless you’re a qualified veteran, the days of 100% financing in Arizona and California are pretty much unheard of. However, there is this little kept secret called USDA Rural Housing program that allows 100% financing.
What does this mean for me? Simple, it means that if you are looking for a new home in the USDA Rural designated areas, then you can get into a home with as little as ZERO dollars. Yeah, really.
Well, what about closing costs for the loan? Yeah, another cool feature of USDA. In this market, it is very customary for the Seller of the property to pay a portion, if not all, of the Buyer’s (yours) closing costs and pre-paid finance charges. This amount has restrictions depending on the home loan type, but USDA is the most liberal. In fact, they don’t even have a maximum amount that the Seller can pay on your behalf. So, this makes it even more attractive! Now you can realistically purchase a home with absolutely no money down. PLUS, have the seller pay all of your closing costs. Not bad, huh? So let’s say that you’ve saved a bunch of money to purchase a home. Or, you’ve been given a gift to help with the purchase of the home. Can you think of anything else to spend that money on, since you no longer need it for the purchase? No, not a boat. I’m talking about things like landscaping, home furnishings, etc.. Believe me, Home Depot and Lowes turn into the “$100 store” for new homeowners. That means that you can’t walk into those stores without walking out at least $100 lighter in the wallet.
Another cool feature of the USDA Rural Housing loan program is no Private Mortgage Insurance. Typically when you buy a property with less than 20% down, you have to pay some sort of mortgage insurance to protect the lender against your potential default on the home loan. This is included in the monthly payment, but let’s face it; you’re paying an insurance premium that protects someone else. Not for you. By not having monthly mortgage insurance, your home loan payment is less. Allowing you to purchase more home, or just have a lower payment than you would by utilizing a different home loan type.
But wait, there’s more. In addition to the liberal down payment allowances (or lack of), seller contributions, etc; USDA is also liberal for people with lower credit ratings than what some of the other financing types want to see. This allows a person with a 620 FICO score and higher to get into a home loan, with all of the above features, and not get hit hard with a higher interest rate. In fact, USDA interest rates are quite comparative to FHA and Conventional financing types.
Wow, these are great features? What’s the catch?
Yes, these are great features. In addition to standard Underwriting restrictions, there are two restrictions to consider with a USDA Rural Housing loan.
Geography – This means that this financing type is only good in USDA Rural Housing Designated areas. That means that if you want to be in a high-rise in downtown Phoenix, LA, San Diego, etc… you’re not going to be able to do it. However, there are many Rural designated areas that you wouldn’t even consider to be “rural”. This is a good thing for you. Please feel free to check Property Eligibility or Area Eligibility to see if the areas you’re interested in, will allow USDA financing.
Income Limitations – USDA has a mission to help moderate income families obtain homeownership. That said, there is a income restriction of 115% of the area median income in whatever area you may be shopping. So, for more information about those specific restrictions, just reach out to us by phone, email, or fill out our contact form.
So, how do you feel now? Excited? Yeah, we are too. Again, for more information or deeper discussion about how a USDA Rural Housing loan can help you, contact The Veracity Team. We’d love to help you.