Tuesday, May 3, 2011

Want a No Money Down Home Loan Then Try USDA Rural Loans

rural houseImage by Shahram Sharif via FlickrRural Housing Direct Loans are loans that are directly funded by the Government. These loans are available for low- and very low-income households to obtain homeownership. 

Applicants may obtain 100% financing to purchase an existing dwelling, purchase a site and construct a dwelling, or purchase newly constructed dwellings located in rural areas. Mortgage payments are based on the household's adjusted income. These loans are commonly referred to as Section 502 Direct Loans.

How do I know if I am eligible?

As you may assume your income must have to be low. But that's not true. In my county a person can make as much as $68,000 per year. Other areas of the country you can make as much as $97,000. Low income, really! Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI. 

 Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance, which are typically within 22 to 26 percent of an applicant's income. However, payment subsidy is available to applicants to enhance repayment ability. Applicants must be unable to obtain credit elsewhere, yet have reasonable credit histories. .

What are the terms of the loan?

Loans are for up to 33 years (38 for those with incomes below 60 percent of AMI and who cannot afford 33-year terms). The term is 30 years for manufactured homes. The promissory note interest rate is set by HCFP based on the Government’s cost of money. However, that interest rate is modified by payment assistance subsidy.

How long does it take to be approved?

Rural Development officials should make a decision within 30 days of the Rural Development office's receipt of the application.

Does the USDA have guaranteed loans?

Yes. Section 502 loans are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.
Eligibility: Applicants for loans may have an income of up to 115% of the median income for the area. Area income limits for this program are here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories.

Approved lenders under the Single Family Housing Guaranteed Loan program include:

  • State housing agency;
  • Lenders approved by:
  • HUD for submission of applications for Federal Housing Mortgage Insurance or as an issuer of Ginnie Mae mortgage backed securities;
  • the U.S. Veterans Administration as a qualified mortgagee;
  • Fannie Mae for participation in family mortgage loans;
  • Freddie Mac for participation in family mortgage loans;
  • Any FCS (Farm Credit System) institution with direct lending authority;
  • Any lender participating in other USDA Rural Development and/or Farm Service Agency guaranteed loan programs.

What are the Terms?

Loans are for 30 years. The promissory note interest rate is set by the lender.

There is no required down payment. The lender must also determine repayment feasibility, using ratios of repayment (gross) income to PITI and to total family debt.

What will they guarantee loans for?

 Under the Section 502 program, housing must be modest in size, design, and cost. Houses constructed, purchased, or rehabilitated must meet the voluntary national model building code adopted by the state and HCFP thermal and site standards. New Manufactured housing must be permanently installed and meet the HUD Manufactured Housing Construction and Safety Standards and HCFP thermal and site standards. Existing manufactured housing will not be guaranteed unless it is already financed with an HCFP direct or guaranteed loan or it is Real Estate Owned (REO) formerly secured by an HCFP direct or guaranteed loan.

It's amazing these kinds of loans still exist. No money down and no PMI. They are meant to serve the low income population, but are upper limits of $97,000 condidered low income? Rural is the the key word here but when you use their eligibility map most cities are eligible, but not your major cities. But some areas are in close proximity to major cities, check the sites map function to see.

To see if you and your property location is eligible go to USDA Income and Property Eligibility Site

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