What is USDA Rural Development?
Let's take a look at a hidden gem in today's housing market. It's a mortgage loan option that works great for home buyers with little-to-no money for a down payment. These homeowners must be willing to house hunt in specific geographic locations. You must also met specific guidelines set up by the government entity behind this program. It's called USDA Rural Development. Despite the name, Rural Development is not for farmers. It's for home buyers who need a little help with the down payment, but who have solid credit.
The USDA Rural Development mortgage option lets you borrow 100% of the appraised value of the house. In other words, you don't need to come up with the down payment. In fact, you can actually borrow 2% more than the appraised value, and use the extra to make some light repairs or home improvements. The main requirement for a USDA Rural Development mortgage is that the property must fall within certain geographical areas. You'll need to avoid the city limits of major metropolitan centers.
Now, this doesn't mean you have to live "way out in the country." While that is an option if it appeals to you, many areas that fall under the Rural Development umbrella are actually more suburban than you'd expect. As an example, rural development in northern Indiana covers most areas except Gary, South Bend and Fort Wayne. Other villages, towns and areas are eligible.
Under the Guaranteed Loan program, USDA Rural Development guarantees loans made by private sector lenders like AmeriFirst Home Mortgage. A loan guaranteed through RD means that, should the individual borrower default on the loan, RD will pay the private financier for the loan. You work with AmeriFirst and make your payments to us.
This mortgage loan option is one of those hidden gems no one seems to know about. AmeriFirst Home Mortgage is helping to change that. For buyers looking to buy a home with no down payment and are open to suggestion on the geographic location of the home, the Rural Development Mortgage from the United States Department of Agriculture (USDA) is a great option.
Again, under the terms of the program, an individual or family may borrow up to 102% of the appraised value of the home, which eliminates the need for a down payment. The home must meet location requirements set up by the USDA. These are non-urban areas, but often include many villages and small towns near bigger cities.
The home must be owner-occupied and single family housing, but there are no lot size restrictions. The loan term is a 30-year fixed rate mortgage. Debt to income ratios for RD are: your house payment should be less than 29% of your income. Your total debt should not exceed 41% of your income, and it does allow for non-traditional credit. Another benefit to RD is that you have no limit on how much the seller can contribute to your closing costs, and gift money is allowed for covering those closing costs as well.
If your home is already in a USDA Rural Development mortgage, you might be able to refinance with RD and help yourself save some money. AmeriFirst Home Mortgage is one of a handful of lenders well-versed in this area.
The bottom line is that USDA Rural Development is a great zero down payment option for first time home buyers and other hopeful homeowners.
Learn more about your home buying options with our free eBook. Download "The Only Mortgage Loan Options Guide You Need" at the button below. From USDA Rural Development to FHA loans and home improvement loans, your options are laid out in this 12-page guide.
(creative commons photo credit)