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:
- a moderate income (115% of area median income)
- acceptable credit history
- U.S. citizen or qualified resident alien
- owner-occupant
- ability to repay the loan
They base the ability to repay on: Principle, Interest, Taxes, and Insurance (PITI) divided by gross monthly income. This total must be equal to or less than 29 percent. Your total debt divided by your gross monthly income must be equal to, or less than, 41 percent.
These mortgages are for 30 years and the rate is fixed at market interest rates.
Homes that qualify can be new or existing homes in good condition. They can be any size or design. The loan is only for homes to be used as your personal residence.
If the appraisal is high enough, the loan amount may include closing costs and escrow fees.
Qualifying homes must be located in rural areas but they, apparently, base qualifying location on old maps! We have a number of homes that qualify and are located right in the heart of subdivisions. To find out if the property you’re interested in qualifies, click on this map and fill in the address.
There are loan limits depending upon your state. Click here to check out the USDA loan limits and income limits for your state and county.
***UPDATE***
We recently contacted a lender for a seller who wanted to apply for one of these loans. The lender told us that, as of April 2010, they were no longer available, that the available funds had all been used.
Have you heard the same thing? Please, let me know. Thanks.
Update: There are no more USDA loans. They’re broke. Big surprise. We had a lender tell us not to apply for any more of these loans because they were gone in April.
May 3rd, 2010 / 3:55 pm
Lender Update 2010-19
Rural Housing Preservation and Stabilization Act of 2010
Yesterday, the U.S. House of Representatives passed the Rural Housing Preservation and Stabilization Act of 2010 (H.R. 5017). Through this legislation, the guarantee fee in the USDA Guaranteed Rural Housing (GRH) Program may be raised to offset any need for Congressional appropriations. Additionally, H.R. 5017 would authorize USDA Rural Development to guarantee up to $30 billion in loans in Fiscal Year 2010. This would represent an additional $18 billion in loan making authority for the remainder of this fiscal year.
Before these changes can be implemented, similar legislative action will need to occur in the U.S. Senate.
Following this action in the House, the USDA Rural Development National Office sent an announcement that stated: “Depending upon Congressional activity with the proposed legislation it is possible that the Agency may consider issuing Conditional Commitments.”
The purpose of this update is to keep your organization apprised of the actions being taken to address the pending lack of funding for the USDA GRH Program. Please share this information with your loan origination and processing staff, as well as with Realtors and builders. We will continue to keep you updated regarding available program funding, in addition to any legislative events pertaining to the USDA GRH Program.
As always, we at Chase remain committed to the USDA Guaranteed Rural Housing Program and appreciate your support of the home financing needs of rural America. If you have questions or need additional assistance, please feel free to contact your Chase Rural Housing Account Executive.
May 4th, 2010 / 4:21 pm
Thank you, Bill. Please let us all know if this passes the Senate and becomes law.
May 4th, 2010 / 5:34 pm