The USDA Rural Development Home Loan program is the best kept secret in the real estate world. Many consumers are not aware of the USDA RD home loans because many Realtors aren’t either. I was just pleasantly surprised my my preferred mortgage broker when he promised me that my buyers would come to the table with NO MONEY DOWN. It’s been since early 2008 since I closed on a home with a buyer bringing no money to the closing table. It’s just unheard of in this market. Sounds too good to be true, right? I thought so, too until I went to the closing earlier this month.
But alas, I can see a shimmering light at the end of the mortgage crisis. Not only is the USDA RD Home Loan a viable mortgage program, it’s also relatively easy to qualify for. It’s parameters run closely to that of an FHA loan, but with a few less stringent qualifiers. The key requirements to qualify for the Texas USDA mortgage program are simple:
- You must be a US citizen or a legal permanent resident
- The property must be in a qualified rural area
- The property must be for residential use – not a farm of for commercial use
- You need to have enough income for the home you want – generally the payment should not be more than 29% of your gross monthly income
- You must have no credit or a reasonably good credit history
- Your family income should not be more than 115% of the US median income
- The applicant should not already own a suitable home in the commuting area of the proposed property
Other conditions may apply but you will probably qualify if you meet the above requirements
The Texas USDA Rural Development home loan program was designed to provide affordable housing for residents in rural areas. In many cases this is the best mortgage for buyers in rural areas. Here are some of the USDA RD program features:
- 100% Financing – No down payment is required
- No cash reserves are required – Many other programs require that you have a certain amount of cash in reserve at closing
- Seller concessions are allowed up to 6% – This means that the seller can pay some or all of your closing costs
- There is no minimum FICO credit score – Clients with no credit history may qualify. (Those with a credit history should have reasonably good credit)
- There is no limit to the purchase price – It must be reasonable for your income
- NOT just for first time buyers
- Very low interest rate
- No PMI insurance – This helps keep your mortgage payment low
Is this loan a true, no money down loan? Yes, absolutely. There is no down payment required to qualify. However, every home purchase will require some money out of pocket for inspections and appraisals. Home buyer can expect to pay $300 to $400 for an appraisal before closing as well as an inspection fee that varies depending on home size, but typically less that $400. Buyers can also ask the seller to pay all other closing costs as long as that is not more than 6% of the selling price. And buyers are allowed to roll in closing costs into the USDA loan.
If your credit score is above 620 you will have a very good chance of qualifying. You may still qualify with a lower score if your credit is reasonably good. You should not have more than 1 payment that was 30 days late in the last year. And if you have NO credit you may still be ably to qualify using references for things like utility payments, rental history, monthly auto insurance, and other payment records.
How does this program compare to a FHA mortgage? In most cases the USDA mortgage will be better than FHA if you qualify. USDA is 0% down and FHA is 3% or more down. Also FHA charges an extra ½ % fee added to your payment and USDA doesn’t. The rate is usually similar or better with USDA.
For more information on areas that qualify for USDA RD loans, call 214.799.0774 or visit www.FindMcKinneyHomesForSale.com.