How To Buy Your First Home With No Money Down
USDA-RD Home Loan Is The Best-Kept Secret And Requires No Down Payment
Is USDA-RD the best kept secret to buy your first home with no money down and use other people’s money with the Single Family Housing Direct Loan Program?
I can answer that by saying I am a success story.
It has been over eleven years since I bought a home through this program.
Yet, I am astonished that most rural Americans have no knowledge of its 100% financing, no down payment, and low interest rate.
The USDA Rural Development Single Family Housing Direct Loan Program can assist individuals, single parents and families with acquiring a home.
“And, not necessarily your first home, with no or practically no down payment, depending on your income.”Tonza
USDA-RD Home Loan Best Kept Secret — Sounds Too Good To Be True?
The house you want must be in a qualified USDA-RD region, and certain income requirements apply.
You may be pleasantly surprised to learn that an eligible home can be located in a subdivision, in a rural area.
In today’s Real Estate market, it is not unlikely to make a 40% down payment, which eliminates the average home buyer.
However, USDA-RD requires no down payment (based on certain qualifications).
It has better rates than an FHA loan, and the ability to finance closing costs.
The fact is, the U.S. Department of Agriculture owns the most land and property in the U.S.
Therefore, it is the richest mortgage banker that can guarantee rural development loans.
Why Does USDA-RD Do It?
The USDA-RD provides loans to people and businesses in certain rural locations that don’t have the tax base and revenue of urban cities.
The USDA-RD uses population data from the U.S. Census and other factors to determine which areas of the country count as “rural.”
Then, it allows buyers in these areas (who meet a few other requirements) to get a USDA-backed loan from an approved lender, or directly from USDA-RD.
What Are The Pros Of USDA-RD Loans?
It requires no down payment but, still has rates competitive with other government mortgage products.
FHA loans require a 3.5% down payment at minimum, and encumber low-credit buyers with costly mortgage insurance premiums.
USDA-RD mortgages only require a small annual fee (a fraction of the FHA’s rates).
In addition to an upfront premium of 2% of the loan amount.
However, that premium can be rolled into the mortgage, giving buyers the option of getting financed with a 0% down payment.
What Are The Cons Of USDA-RD Loans?
The USDA-RD limits who can get one of these loans.
If you make more than 115% of your area’s median income or already have “adequate housing,” you’re not eligible for USDA-RD financing.
You’re also required to purchase housing that is “modest in size, design, and cost,” and meets various building codes.
From my experience, the USDA-RD does have a strict credit minimum, and requires that no debts are outstanding.
Other lenders may have different credit requirements.
You can read the details of buyer and property requirements on the USDA-RD’s website.
You must live in a specific area defined by the USDA-RD as rural.
The department provides a map showing which regions are eligible here.
Will Specific Rural Areas Always Be Eligible?
The short answer is no.
There may have been more rural areas in a region at one time eligible for the USDA-RD loan program.
But, have been closed, which is what I encountered when I was ready to submit my application.
Therefore, the only choice I had was to move to an area within the USDA-RD eligibility zone (Palmetto, Georgia).
How Do You Get A Home Before Your Rural Area Is Made Ineligible?
The USDA-RD updates their map for eligible areas periodically, so you need to visit the website here: USDA-RD Applicant and Income Requirements
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