Yes, it’s true! You CAN buy a home with literally zero down.
This USDA loan information is accurate as of today, February 13, 2015. If you get your USDA home loan information elsewhere, double-check the publish date of the article to make sure that it’s current.
USDA LOANS: LOW RATES WITH NO DOWNPAYMENT
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USDA loans are mortgage loans which are guaranteed by the U.S. Department of Agriculture. The program is officially known as the USDA Rural Development Guaranteed Housing Loan Program, or the “Section 502 loan”, named for its place in the USDA charter.
USDA loans are also known as “Rural Housing Loans”, which can be a bit of a misnomer. USDA loans can be used be used in rural areas, but many suburban areas remain eligible as well for the program as well.
USDA loans are popular among today’s home buyers because the USDA program offers no-money-down financing.
Home buyers can finance 100% of a home’s purchase price; and, can even use the loan to help purchase a manufactured home or a modular home.
Furthermore, because USDA loans are guaranteed against loss by the U.S. Department of Agriculture, they are of very little risk to banks which make them. Low risk brings low rates and this is why USDA mortgage rates today are often the lowest of all of the government-backed mortgages.
Lastly, the USDA loan program offers reduced mortgage insurance premiums (MIP) to its borrowers.
The annual USDA mortgage insurance premium — at just four-tenths of one percent per year — is 70% lower than the MIP charged for a comparable FHA-backed loan.
USDA loans can be big money-savers; and they’re available to first-time home buyers as well as repeat home buyers. Homeownership counseling is not required to use the USDA home loan program.
Most closings can happen in 45 days or fewer.
USDA MORTGAGE INSURANCE REQUIREMENTS
The USDA mortgage is backed by the U.S. Department of Agriculture, and partially funded by the borrowers which use the program. Via mortgage insurance premiums charged to program homeowners, the government is able to keep the Rural Housing Loan program affordable.
The USDA last changed its mortgage insurance rates in October 2012. Those rates remain in effect today, February 13, 2015.
Today’s USDA mortgage insurance rates are :
- 2.00% upfront fee paid at closing, based on the loan size
- 0.40% annual fee, based on the remaining principal balance
As a real-life example of how USDA mortgage insurance works, let’s say that a home buyer in Cary, North Carolina is borrowing $200,000 to buy a home with no money down. The buyer’s mortgage insurance costs will include a $4,000 upfront mortgage insurance premium, which is added to the loan size of $200,000; plus a monthly $66.66 payment for mortgage insurance.
Note that the USDA upfront mortgage insurance is not required to be paid as cash. It can be added to your loan balance for you to reduce your funds required at closing.
2015 USDA LOAN INCOME LIMITS
Via its Rural Housing Loan, the USDA offers 100% financing at very low mortgage rates in rural and suburban neighborhoods. Even better is that underwriting approvals are “relaxed”. Borrowers don’t need to meet every requirement to the last letter in order to get approved.
However, there is one area in which the USDA is unyielding.
The USDA will not guarantee a mortgage for a household which exceeds its maximum income limits for a given area. This is because the USDA is meant to promote homeownership among households of “modest means” only.
To be eligible for the USDA financing, then, the agency states that a household’s annual earnings must not exceed the median household income for the area by more than 15 percent, with an allowance for the size of your household.
For example, the 2015 USDA income limit for an 8-member household is higher than the USDA income limit for a 4-member household; just as the income limit for a 10-member household will be higher than the income limit for an 8-member household; and, so on.
2015 USDA income limits have a floor, based on household size:
- 1-4 member household : $74,750
- 5-8 member household : $98,650
Note that USDA income limits vary by area, though. In San Francisco, California, where the cost of living is among the highest in the nation, the 2015 USDA income limits for a 1-4 member household is $131,100.
This article published by: http://themortgagereports.com/16242/usda-loan-income-limits-eligibility