Zero Down Mortgage? Yes, With The USDA Home Loan

Zero Down Mortgage?  Yes, With The USDA Home Loan

As a loan originator, I get lots of questions from home buyers and Realtors about 100% financing. After the recent home mortgage meltdown crisis, nearly all 100% financing options went bye-bye. USDA, however, did not!  In fact, with the USDA home loan you can actually borrow 103.5% to cover the one-time 3.5% reservation fee.

Maybe the best part of all is that even though you are putting no money down, unlike an FHA loan, with a USDA home loan at 100% financing there is currently NO PMI (private mortgage insurance).

Here's a quick video I did with Vince  Maloney of the USDA (United States Department of Agriculture).  Vince and Trisha Viscardi of Chase Home Lending were in Fort Wayne, Indiana to put on a seminar on the USDA rural Housing program.

 There are a few basic limitations, however. The main two are income limitations (maximum family income of a family 1-4 people is roughly $75,000 in Indiana), and location (house must be located in an approved area).

In our neck of the woods here's the qualification map.  The shaded areas are NOT eligible, which leaves a TON that IS eligible.

When you go to the "real" map on the USDA or Chase's web site, you can zoom in and easily see the boundaries for the USDA 100% home loan .  You can even enter in your property address and it will tell you whether or not that address is eligible for a USDA guaranteed home loan.  Pretty slick!

Here's the link to the maximum income limits for Indiana

Finally, here's some addition USDA Home Loan "fine print" for you detail-oriented types. ;-P 

• Monthly mortgage insurance to begin fiscal 2012, which October 1, 2011.  The Guarantee fee will drop to 2% and a monthly MI premium of .30 will be added to all USDA loans. 
• Education for first-time homebuyers is no longer required by USDA in Indiana.  Some investors overlays may still require it, however.
• Soon all of Aboite Township will NOT be eligible for the USDA Home Loan.  
• Can finance closing costs up to 100% of appraised value, not including Guarantee Fee. With Guarantee Fee can finance 103.5% of appraised value
• Unlimited seller contributions allowed
• Unrestricted gift funds, can come from any source other than an interested party.
• Extra ways you can stay under the maximum income:  Can deduct child care costs dollar for dollar from household income for children 12 and under. You can deduct $480 per dependent under 18. You can also deduct $400 per household member over 62 off of the annual household income.
• Derogatory credit after a BK will be tough from now on
• If a borrower had bad credit before owning a home or having any time of living expense (rent, etc) it will be tough to get an approval
• A 660 score and above will allow for unsecured funds for closing (putting cash to close on credit card, for instance).
• The USDA Guarantee Fee can be partial financed. This is unlike FHA where the MIP has to be either entirely paid in cash or entirely financed. The seller or the lender can pay just a portion or all of the Guarantee Fee and the borrower can finance the difference
• No Pest Inspection or Septic Inspection will be required unless addressed in appraisal.
• A Water test is always required on private wells for a USDA home loan.
• Required repair items for escrow cannot exceed $10k or 10% of loan amount, the lesser of the two. The home must still appraise for no less than the proposed loan amount.
• In RARE situations a USDA home loan CAN be approved even when the borrower owns another property.  If the borrower has a 50 mile or more commute, if the house too small for family (outgrown), other home not affixed to foundation (mobile home).  Caution on these!  Case by case.

For questions about the USDA home loan program, FHA loans, VA loans (and every other conceivable type of home loan / home mortgage program), please contact me, Chris Sanderson, Fort Wayne's own Tech Savvy Lender, at 260-414-3511 or shoot me a quick email at mrchrissanderson@ruoff.com.