The biggest setback for aspiring homeowners these days is the bulky down payment required by mortgage lenders for conventional loans. While there are other cheaper alternatives sponsored by the government, most of them demand for at least 3% of the property’s purchase price upfront. However, there are two government-guaranteed zero down payment mortgage available. These are the VA loan and the USDA loan. Because the VA loan is exclusive to military members, veterans, and their spouses, your most significant chance of snagging a home loan without any money down is the USDA Rural Development Home Mortgage.
Interested? Read on.
The USDA Rural Development Home Loan Program
The United States Department of Agriculture backs up the USDA housing program as a testimony to the federal government’s vested interest in delivering stable and affordable residential opportunities for its citizens. The program is available to individuals and households who meet the designated income requirements and who wish to buy homes within qualified communities.
Through the guarantee extended by the USDA, lenders can issue loans with less strict standards than usual. For the USDA guaranteed loan program, this includes:
- A credit score of 620, which is comparably lower than the average 700 FICO score required for a conventional mortgage.
- A higher debt-to-income ratio (DTI), which is 41% of the borrower’s gross monthly earnings.
- No minimum income required, as long as the applicant has a stable job and a steady source of income.
- A no down payment mortgage for those who meet the requirements.
- Lower interest and insurance fees.
- Closing cost concessions, where the homebuyer is allowed to roll the closing expenses into the mortgage or use gift money to cover part of the fees. The seller may also cover a part of the required payment.
These terms are, however, flexible with the consent of the lender. Applicants with poor credit history may qualify through non-traditional credit references like utility bills and rental payment receipts. A higher DTI may also be allowed if the borrower has an excellent credit score.
Who may apply for the a USDA Zero Down payment Mortgage?
Since the loan is specially intended for lower-class households, only those who earn no more than 115% of their area’s median income, adjusted to household size, may apply.
The property applied for financing is also subject to specific qualification standards. The primary consideration is the location, which must be in a USDA-approved site. Although the loan does not cover homes close to and within metropolitan centers, many suburban areas are eligible. In fact, the USDA Rural Development Housing Program can finance more or less than 97% of the United States.
If you want to learn more about the specifications of the loan and the application process, you may contact the USDA office in your area for a list of authorized lenders. You can also opt to consult home loan professionals. These experts can walk you through the procedure and answer any personal or financial queries that may arise.
This loan is the ideal choice for people whose credit and income situations prevent them from qualifying for a loan. You don’t need a stellar credit or down payment to have a home of your own.