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Buying a Home with No Money Down – USDA

Years ago, it was very easy to purchase a home with no money down, or 100% financing. Then this little thing hit called the “mortgage meltdown” hit in 2007 and everything changed where almost every program requires a borrower put some type of down payment on a purchase. However, there are still certain types of mortgages that will finance 100% of the purchase price of your home, they are a US Department of Agriculture(USDA) mortgage and a Veterans Administration(VA) mortgage. We will cover those today.

USDA Mortgage

The US Department of Agriculture has guaranteed mortgages for borrowers who would like to purchase a home in certain areas deemed rural by USDA. Don’t be fooled by the name, despite the USDA label, this mortgage is for a normal residential, rural homes and do not apply to farms.

Qualification points:

Property Eligibility

USDA eligibility is determined by properties in certain zip codes that are deemed rural. A USDA borrower can only own one home.

Income Ceilings

Unlike other mortgages, there is an income ceiling based on zip code. So in other words, you can’t make too little, or else you don’t qualify, and you can’t make too much, or else you don’t qualify.

Zip code eligibility and income ceilings can be obtained at: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

Advantages:

The greatest advantage of a USDA mortgage is that it allows for 100% financing at very reasonable rates. Not only that, but in some cases, a borrower can finance over 100% of the purchase price, using the excess to pay for closing costs, provided the appraised value of the home is sufficient. For example, John, from Chesterfield, is moving and buying a home in Warrenton, MO for $150,000. The home appraises for $160,000. John can raise his loan amount above the purchase price of $150,000 to $155,000 to pay for closing costs and prepaids so he can purchase his home with nothing out of pocket.

To Conclude:

Provided the places you are looking are deemed rural by the USDA(you would be surprised) a USDA mortgage is a good way to buy a home with no money down.