USDA Loan: Could It Be Right for You?

You may need less money to buy a home than you think! Many would-be home buyers struggle to save enough money to cover closing costs needed to purchase a home. They have some money in savings, and could cover a monthly mortgage payment and expenses, but it’s that big lump sum up front that keeps them from their dream of home ownership. 

USDA loans require 0% down and can help buyers with smaller savings get into a home. For example, a home that costs $180,000 would require approximately $15,000 in closing costs for an FHA loan with 3.5% down. That same home using a USDA loan with 0% down would require approximately $8,000 in closing costs. (Just so you know, closing costs include your down payment, lender fees, title insurance, escrows, etc.)

You see that, in this case, closing costs are cut almost in half. The seller is also allowed to help pay closing costs, up to 6% of the sale’s price. In this market, however, seller help is difficult to obtain as housing inventory is low and most homes for sale have more than one interested buyer. Don’t give up though because there are times when a home sits on the market and the seller is willing to help. This could reduce your closing costs substantially. (Last year I had a buyer purchase a home with less than $2,000 in closing costs!)

USDA loans do have specific requirements. For the buyer there are household income limits as well as other eligibility requirements. The property must also qualify for a USDA loan, as these loans are not for urban areas. You can type in a property to check its eligibility: https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp.

Let’s get some input from a lender on USDA loans. I asked, and Robin Bolin from Prosper Mortgage answered:

Q: Who should consider a USDA loan?

A: Anyone who would like to buy a home in an eligible area with little or no down payment funds available.

Q: Is it hard to qualify for a USDA loan?

A: It is a little stricter on debt ratio requirements than FHA, but low credit scores are okay.

Q: What are the advantages and disadvantages of a USDA loan?

A: Advantage: 100% Financing. With very little savings and the seller helping with closing costs you can get into a home. Plus low monthly mortgage insurance, more seller help available than in a traditional conventional loan, and competitive interest rates. Disadvantage: The home must be in an eligible area and buyer must be under moderate income guidelines for the area.

This type of loan is good for everyone who is looking for a home and feels they do not have enough $$$ to buy a home!! Stop wasting your money on rent and invest in your future.

For more information, contact me or Robin.

Robin Bolin

robin@pmfpa.com

NMLS#188822

Prosper Mortgage Funding, LLC

(866) 446-6333 ext 103 Toll Free

(717) 569-8703 Direct Line

(717) 808-1558 Cell

Lisa Graham

lisa@kingswayrealty.com

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