More often than not these days, we are working with clients who have little to no money to put down on a home. Many of these borrowers are well qualified, but are just unable to save money because rents in the marketplace have become so high that their money is being tossed away each month for their monthly housing. Our goal is to help them own their own home for less than rent so that they can finally start saving once we complete the transaction.
We currently do business primarily in an area which is considered Eligible for Rural Housing financing. Why is this a benefit to new homeowners? Because, simply put, it has the most “Bang for your Buck”.
Rural Housing most often has rates that compare closely to FHA rates and is currently running at a .40% monthly mortgage insurance rate where FHA is running a 1.25%. Though these loans have a tiny bit higher upfront fee (USDA Guarantee Fee – 2% vs. FHA upfront MIP – 1.75%), the payments end up being much lower on these programs. And what’s better is there is No Down payment required!
Here in Minnesota, we have the ability to do Minnesota Housing loans (which require $1,000 into the transaction), down payment assistance loans, or use grant funds if available from the state, city, or county. But, most of these options come with “conditions”. i.e. ‘must stay in the home for 5 years before debt is forgiven’. In some cases, the debt is never forgiven or is only partially forgiven after a certain amount of time. When the house is sold or refinanced, the homeowner is on the hook for these funds.
Many buyers call me up and ask for down payment assistance so they can get into a home. My question to them is always, “Why?” When we have a Rural Housing loan program available where you don’t need any money down, the rates are low, you won’t have to pay any money back upon sale or transfer, AND the seller can pay your closing costs….why?
There are many different financing options available and we always do our best to find the best solution for every buyer’s financial goals. And I feel lucky to be in an area where I can offer this to my buyers as a mortgage financing option.