I am working with a client who is buying a house in Queen Creek and he asked me “why doesn’t everyone know about USDA loans?”
Good question.
Here are just a few of the reasons that USDA loans are quickly becoming a loan program that people love to use.
USDA Loans: A True 100% Home Loan
With the USDA loan program, no down payment is required and you are able to finance up to 102% of the property’s appraised value. With the elimination of the down payment assistance programs in late 2008, the USDA loan program is one of the only 100% loan programs available.
USDA Loans: No Up Front or Monthly Mortgage Insurance
With the USDA loan program, there is no up front or monthly mortgage insurance required. With the FHA loan program, you have both up front mortgage insurance premium and monthly mortgage insurance as well.
With no mortgage insurance required, the USDA loan program can save you hundreds (possibly even thousands) of dollars each year that mortgage insurance would cost with a different type of loan.
USDA Loans: No Credit Score Required
For the USDA loan program, officially, there is no credit score required… but unofficially, the minimum credit score that you will need to get approved by an investor is 620. This is relatively recent and may change back to the official answer — but for now, you need a 620 mid FICO score to qualify for the USDA loan program.
USDA Loans: No Loan Limit
The USDA loan program will allow you to finance “as much as you can afford”. There is no official loan limit with the USDA loan program, but the amount of money that you can borrow depends on your ability to repay the loan.
USDA Loans: Seller Concessions Are Allowed
With the USDA loan program, you can get the seller to pay as many of your closing costs as you can. There are no limits on “seller concessions” so negotiate the best deal that you can! Many loan programs limit the amount of seller concessions that you can have, but the USDA loan program doesn’t put a limit on them.
The USDA loan program is a great option for people who are looking to buy a house with little or no money down. The only “bad” thing about the USDA loan program? The only thing that I can think of is that you will have to find a property that can qualify – and sometimes you may have to drive a ways to get there.
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You have to make sure your free of collections for at least
6 months….
Great post about USDA loans. It is true that not enough people know about them. A couple clarifications I think is worth mentioning: USDA does have a 2% funding fee that is rolled into the loan. This is why USDA has the 102% financing so that borrowers do not have to come out of pocket for that. However there is no monthly mortgage insurance which when compared to an FHA loan can save you a lot of money. Another benefit, if the seller is not willing to pay your closing costs and the house appraises for more than the purchase price you can use that difference to finance your closing costs! Lastly, if the house needs repairs you can finance up to $10,000 in repairs to the home. In the Arizona market, with the amount of foreclosures and home that need a small rehab this is a huge benefit. Feel free to email me directly for any specifics on USDA loans. colsen@castlecooke.com
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