Many people think that today’s buying opportunities are just for investors with cash. Not true. USDA (U.S. Department of Agriculture) offers 100 percent financing for moderate to low-income buyers in rural areas like ours.
Yes, a borrower who meets the USDA guidelines can buy a home without a down payment.
An eligible borrower must have an adequate and dependable income, be a U.S. citizen, qualified alien or be legally admitted to the U.S. for permanent residence.
The adjusted annual household income cannot exceed the moderate-income limit established for the area. A family’s income includes the total gross income of the applicant, co-applicant and any other adults in the household. The borrowers debt cannot exceed 41 percent of their income.
For the home to qualify, it must be located in a rural area, be structurally sound, functionally adequate and in good repair. There are no restrictions on the size or design. The homes must not be used for income producing purposes.
USDA defines a rural area as open country and a population of 10,000 or less and under certain conditions towns and cities with between 10-25,000 residents.
USDA has a map on their website. All you have to do is enter the property that you would like to buy and it will tell you whether or not the property qualifies. Luckily for Auburn area residents, most of the properties surrounding us qualify.
To get started, I would recommend going to your select lender. Have them qualify you and the property.
I spoke with Ryan Rivera of Goldmine Financial. He has closed about a dozen USDA loans this year. He said it was a very simple process with specific guidelines.
“I can actually qualify someone through an automated underwriting system. We get to use our own local appraisers. This really helps to expedite the process,” Ryan explained.
“Once the borrower has gone through the approval process, I send the package directly to USDA where it undergoes a mini-underwriting process so it can be stamped for approval and loan docs generated,” Ryan continued.
USDA will allow up to a 6% credit back from the seller for the buyers recurring and nonrecurring closing costs.
“I always suggest that even though the interest rate is competitive, any seller credits be used to buy the interest rate down even further,” advised Ryan.
A one-time mortgage insurance fee of 2 percent of the loan amount is charged up front. There is no monthly mortgage insurance fee required on a USDA loan. This can save the borrower $91 per month on a $200,000 loan. It is a huge savings over the life of the loan.
“The turn around time for these types of loans is anywhere from 45 to 60 days, usually 45, depending on the loan volume USDA is experiencing at the time,” said Ryan.
Contact your select lender to see if you or a loved one qualifies for a USDA loan. It could be a matter of Good Home $$s and Sense.
Sue Thompson is owner and sales manager of HomeTown Realtors. She can be reached at seesue@seehometown.com, or on the Web at www.homedollarsandsense.com.
