USDA – Karen's Perspective

The Cost of 100% Financing

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Tuesday was a good day for the business. We had two closings on properties we sold.

Here was the interesting thing about one of them. The buyers came to closing with USDA financing. Are you familiar? Under the terms of the program, an individual or family may borrow up to 100% of the appraised value of the home, which eliminates the need for a down payment.

And this family did. They received 100% financing. We’ve sold a number of properties this way. What was unusual in this case was that the seller had to bring $12,112.40 to close on a $143,000 purchase. That’s almost 10% and most of it was for fees! Times have changed and borrowing is not only more difficult but far more expensive!

Here’s a sample of what the buyer had to bring to close on this property with free financing:

$1982 origination charges

$ 400 appraisal fee

$ 48 credit report

$5187 mortgage insurance

$1077 lenders title insurance

USDA Rural Development 100% loans available

ZERO down payment assistance programs are available from the government through the USDA.

Section 502 Loan Guarantee Program loans are primarily used to help low-income individuals or households purchase homes in rural areas. Under the guaranteed loan program, a loan guarantee through the Housing and Community Facilities Programs means that, should the individual borrower default on the loan, HCFP will pay the private financier for the loan.

Under the terms of the program, an individual or family may borrow up to 100% of the appraised value of the home, which eliminates the need for a down payment. Since a common barrier to owning a home for many people is the lack of funds to make a down payment, the availability of the loan guarantees from HCFP makes the reality of owning a home available to a much larger percentage of Americans.

Eligibility requirements include:

USDA Offers 100% Financing

We recently bought a home, renovated it and put it back on the market all within a month. Just 12 days after listing it, we accepted an offer. Why so quickly in this “difficult to sell” market? One reason may be that we were able to advertise it as qualified for USDA financing. What is USDA financing?

The United States Department of Agriculture offers home loans funded directly by the Government for certain properties. These loans are available for very low and low-income households. Qualified buyers are entitled to 100% financing for their purchase.

In order to be eligible for most USDA loans, households must meet certain income guidelines. Also, the home to be purchased must be located in an eligible rural area as defined by the USDA.

These USDA loans, Section 502 loans, are primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to purchase an existing dwelling, purchase a site and construct a dwelling, or to purchase newly constructed dwellings located in rural areas. Mortgage payments are based on the household’s adjusted income.

There are other requirements such as: