USDA Rural Development Loans in VT - 100% financing is still very much available with USDA Rural Development Loans. Often times this program is overlooked since many loan originators do not have experience with USDA Rural Development, and they do not discuss this as an option with their clients.
The USDA Rural Development program is designed for low-to-moderate income residents whose income is equal to or less than 115% of the area median income. This program makes the dream of home ownership more affordable in rural communities. But don't let the "rural" in the name fool you. There may be some geographical limitations, but most towns and cities in Vermont are eligible, with the exception of a few communities in the Greater Burlington area.
Benefits of the USDA Rural Development Loan:
100% Financing is available with the 2% "Guarantee Fee" for purchases rolled in - total 102% financing
- Maximum loan amount is based on APPRAISED value, so closing costs and repairs can be rolled in
- Ideal for properties that may need some TLC
No mortgage insurance is required for USDA Rural Development
Gift Funds are acceptable
Seller may contribute up to 6% of the sales price to cover closing costs and pre-paid items
Fixed 30-year term, very competitive rates
Flexible Requirements - Borrowers with non-traditional credit histories may be eligible
NOT only for first-time home buyers
USDA Rural Development compared to VA & FHA. 100% financing is also available to qualified veterans through the Veterans Administration with a "VA loan". Compared to USDA's 2% "Guarantee Fee", the VA's "Funding Fee" for 100% financing for first-time use is 2.15% for Regular Military or 2.4% for the National Guard and Reserves. The VA funding fee for subsequent use is 3.3%.
While the USDA Rural Development and the VA offer 100% financing with no monthly mortgage insurance, the minimum down payment for FHA is 3.5% with a 1.75% up-front "Mortgage Insurance Premium" AND monthly mortgage insurance required for 30-year fixed mortgages. While FHA loans are very popular with many of my clients who could not "fit" into USDA Rural Development or VA, borrower qualification for USDA Rural Development should be determined first prior to looking at any other loan program. Why? It simply costs less. The USDA up-front fee is less than that of the VA, and compared to an FHA loan, USDA Rural Development loans allow you to keep more money in your pocket AND provide for a lower total monthly payment.
The USDA Rural Development loan may or may not be the right program for your particular situation. An experienced loan officer should be able to explain your options, determine your eligibility, and answer any questions you may have.