Is 100% Financing Still Available?
This question is asked frequently. Many first time home buyers are cash strapped and need assistance with down payment money. The USDA home mortgage is a great solution to assist the first time buyer, or any buyer, that wants to live in a more rural setting.
Listed below are some of the major highlights of the USDA mortgage.
Property Eligibility - The applicant may retain only one property and it must be a single family owner occupied residence. Certain manufactured homes are eligible as long as they meet the USDA guidelines. The home must be modest in size, design and cost. The home must also be in a USDA eligible area. To verify if a property is eligible you must have the complete address. Verify an address by going to the USDA website.
Credit Guidelines - Applicants must have reasonable credit histories. A 640 middle credit score is a good guideline to go by. Traditional credit reporting is used for determining creditworthiness. Non-traditional credit reporting can also be used in the event an applicant does not have a credit score.
Income Guidelines - USDA has income guidelines that are specific to each county and state. Loan applicants can have an income of up to 115% of the median income for the area. Families must be without adequate housing, but must be able to afford the mortgage payments including taxes and insurance. Debt ratios of 29/41 are used as the guideline for acceptable debt to income ratios. The housing payment cannot exceed 29% of the applicants gross monthly income. All outstanding debt payments, including the new housing payment, cannot exceed 41% of the applicants gross monthly income. The USDA website will walk you through determining your eligibility.
Loan Terms - The loan is a 30 year fixed rate loan.
Assets - The USDA mortgage requires no down payment. Thus it is truly 100% financing. However there will still be closing costs. The applicant(s) must have enough money in order to cover the closing costs of the loan. The money for closing can come from the applicants own funds. Closing costs can be a gift from a family member, a gift from a charitable organization or it can come in the form of seller concessions. The seller of the home can contribute up to 6% of the sales price of the home toward closing costs. The assets for closing can come from one or all of these sources. All sources must be fully documented for underwriting purposes.
These are the major highlights. As usual in any government based program there are caveats to all guidelines. I can guide you through those caveats to make sure you have a great home buying experience.