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What factors need to be considered when applying for a No Money Down Home Loan?? Part 2

By
Mortgage and Lending with Jamie Russen - Greentree Mortgage NMLS ID #95705

This is the second installment of information of what underwriters considering when approving a client for a No Money Down Home Loan. In the first installment we went over the credit requirements.

Today we will look at the 2nd most important factor;

2) Collateral

While it may seem as simple as finding a house and buying a house, it isn't. The  No Down Payment Home Loan ( USDA )has some specific  collateral requirements that are unigue when compared to FHA or Conventional loan financing

The first thing that will be looked at is if the property is located within a USDA eligible community. The USDA relies on a combination of census date and/or the distance from urban areas when they determine if a community is eligible or not.

Let's take a look ata what collateral is generally acceptable for the No Money Down Home Loan ( USDA ).

Eligible USDA properties include:

  • Existing or New Construction homes
  • Townhouses or Condominiums
  • Existing or New Modular Homes
  • Existing property in need of minor repairs ( see notes below )
  • Properties with swimming pools ( see notes below )
  • Properties with a shared well ( An acceptable recorded HUD shared well water agreement will be required if the well is not on the subject property )

An existing property that is in need of some minor repairs can still qualify for a USDA loan but there are some things you need to know, just in case you rush out and find a bank owned property that is in need of some fixing up. These repairs can be financed up the the " AS-IMPROVED " value of the home ( as determined by a real estate appraisal ) but the most important factoris that the repairs and improvements must be completed before the final USDA Gaurantee can be issued. This means that you would have to work with the seller to complete the repairs before funding.

Ineligible Properties Include:

  • Farms and hobby farms
  • Existing manufactured homes
  • Income ( investment ) properties ( no 2-4 unit properties )
  • Property located on a diret road ( all weather surgace for the road is required )
  • Property where the site value is more than 30% of the total appraised value

In summary, when considering a No Down Payment Home Loan ( USDA ) to finance your home purchase the first thing to do is to verify that the property is in a qualifying area. The second thing to do is to review the eligible property types and confirm that it qualifies.

Please do not hesitate to message me about any specific questions you may have about this product or anything else. Thanks!!!

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