One of the side effects of the subprime mortgage cycle we just went through is that many very solid loan programs went unnoticed and unused because there were "easier" options out there. Now with the disappearance of said subprime loans these "old faithful" loan programs are coming back. One of the best ones to resurface in recent weeks is the USDA Rural Development Loan.
The USDA loan was designed to entice home buyers to move into rural, undeveloped areas to buy a new home. They created a government backed loan (meaning the bank is not taking the risk) that is truly zero down and does not have private mortgage insurance (PMI) on it. The rates are very comparable to FHA or conventional rates (6.5%) at the time I am writing this. You will be able to afford about ,000 more in house for the same payment simply due to the fact that there is no PMI. Did you catch the part of about zero down; it is not a typo this loan requires zero down to get into it.
So you may be saying it is too good to be true, and asking what is the catch. Well I would be lying if I said that you were wrong about that. But the catches really aren't that bad. There is an income limit to how much you can make to get a loan like this. It will depend on the size of your family and if you pay child support or not, but for example a family of four in King County is capped at ,400 so it is not too restrictive.
The biggest restriction is you have to purchase in areas that the USDA classifies as rural. Now I know what you are thinking "I am not moving my family out to Winthrop just to get a good loan". Would you be surprised if I told you that half of Maple Valley, Washington is classified as rural by the USDA. As you can see these loans don't force you into buying a farm (not that there is anything wrong with that of course).
If you are first time home buyer or a seasoned pro, you should really consider looking into a USDA rural housing loan option. It very well good be the deal that allows you to buy a house that you may not be qualified for using more conventional loan options.
Not every lender is going to be able to offer you a USDA Rural loan, as only a few different banks will even service them, but if you are working with a broker they should be able to find a lender to fill the need wither it be Chase or Wells Fargo just to name a couple of options.
One other point to make is that this loan is not a refinance loan; it is available only for purchasing new property. Oh and by the way if the property has an in ground pool, it is ineligible. Welcome to the world of tight guidelines.
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