USDA - Rural Development Mortgages
Don't let the name of the mortgage fool you. Or the other name it goes by, the USRD Rural Development Loan. You don't have to live in the boondocks to take advantage of the all the benefits this government program has to offer.
The United States Department of Agriculture and Rural Development guarantees 90% of the loan's value, making it a low-risk proposition for lenders. Thus, it's also one of the most accessible loans you can receive. And more places are eligible than most people imagine. Most of Indiana is eligible. For example, Westville and Haskell, just east of Valparaiso, or Lowell south of Schererville, are both eligible towns.
In addition to choosing a USDA-approved address, borrowers must meet income eligibility guidelines. The exact figure will depend on a number of factors, including household size and your childcare expenses. This is an income ceiling, not an income threshold: if you make a significant amount of money above the median for your area, this loan won't be right for you.
Next, the home you're mortgaging must be your primary residence. No vacation homes, second homes, or rental homes. You also can't purchase a duplex, triplex, or fourplex on a USDA loan, which means you won't have the option to live in one unit while renting out the other.
Most lenders require a credit score of at least 640. Some will go as low as 620. Your DTI can't be higher than 41%.
You will have to make an annual mortgage insurance payment at closing, and the price will be 1% of the house payment. You will also end up with a small monthly insurance fee which will be added to your monthly mortgage payment.
You will need to have a little cash available as a result, even though you won't have to worry about a down payment, or closing costs. Still, it's far easier to gather enough money to cover 1% of a mortgage than it is to save up for even a 3.5% down payment. These are some hefty benefits
Advantages of a USDA Loan
If you're willing to live in an eligible area the USDA loan offers many advantages.
The biggest advantage for many borrowers is that this is one of the few credible zero percent down programs in existence.
Borrowers also benefit from the ability to roll closing costs directly into the loan. Other loans do not make this possible.
These are also trustworthy, fixed-rate loans. You won't have any balloon payments, and you won't have to worry about variable monthly payments. And USDA interest rates are lower even than they are for FHA loans, and are certainly lower than conventional loans.
Is a USDA loan right for you?
This program is available both to first-time home buyers, but it's also open to people who have purchased homes in the past.
If you're interested in a USDA mortgage, call me today. Or stop by A&M Mortgage Group to have a chat about you're unique circumstances and how we can serve you the best.