Have you considered purchasing a new home but feel that your biggest obstacle is coming up with the down payment? For many, this is reality, but thanks to the USDA Guaranteed Home Loan, it’s possible to purchase your dream home with 0% down payment.
The U.S. Department of Agriculture’s Rural Development Guaranteed Housing Loan Program, also known as a USDA loan, offers a 100% financing mortgage for moderate-to-low income homebuyers in eligible rural and suburban areas. The program, originally designed to help rural Americans realize the dream of homeownership, offers many benefits that are not available with other loan programs.
The ability to pay nothing out of pocket for a down payment and get 100% financing is one of the greatest benefits of the program. The no money down feature has allowed many people to buy a home that would otherwise not qualify. Additionally, the USDA Loan allows borrowers to use a gift or grant to go toward their mortgage if available. These benefits make USDA loans perfect for first-time home buyers.
Because a USDA Loan is guaranteed and insured by the U.S. Government, banks and mortgage companies are able to offer USDA loans at very low rates; there is less risk to lenders if the borrower defaults on the loan. Competitive 30 and 15 year fixed interest rate products are available.
Private mortgage insurance is always required for any loan with less than a 20% down payment, regardless of the specific loan program. The good news and benefit of the USDA loan is that its PMI rate is one of the lowest of any loan program and doesn’t change for the life of the loan. Currently, the USDA loan’s PMI annual fee is 0.35 percent, based on the loan’s remaining principal balance.
USDA offers flexible credit underwriting requirements for low to moderate income borrowers. Your credit score will determine if you’re eligible for any loan. USDA considers financing based on the financial situation for the homebuyer. The loan also allows some borrowers with blemished or limited credit histories to qualify for home financing. Lenders may accept “alternate” tradelines, such as rent, utilities, cell phone bills, etc. to represent a payment history if the borrower’s credit history is too short.
As with FHA and VA loans, USDA loans also require an upfront premium, which is 1 percent of the loan amount. The USDA allows borrowers to roll this fee into their financing and close on the loan without putting any money down.
USDA loans allow the seller to pay for the buyer’s closing costs, up to 6% of the sales price. Gift funds from family members are also allowed to cover closing costs with proper documentation.
If the appraised value of the property comes in more than the purchase price of the home, USDA will provide 100% financing on the full amount of the appraised value. The borrower can use the excess funds to finance closing costs.
Click on a location in Wilmington, Leland, or a surrounding area to see which homes are available for USDA 100% Financing.
Any individual or family who plans to occupy a home located in an eligible rural area as their primary residence may qualify for a USDA Loan. As with any home loan, borrowers wishing to apply for a USDA Loan must meet certain eligibility requirements. To qualify, you must meet these requirements: