100% Financing

Today I would like to introduce you to USDA Single Family Housing loans. The United State Department of Agriculture Rural Development has 2 programs that work for the purchase of Single Family Housing. These programs are Rural Housing Direct Loans and Guaranteed Rural Housing Loans.

The best aspect of these loans is that they will finance 100% of the purchase price for a single family home. These loans come with conventional interest rates, there is NO monthly mortgage insurance and the seller can pay for all of the buyers closing cost and pre-paid items. What this means for the buyer is that they can afford more house and they do not need to have any money to get into to the home “as long as they can find a seller that is willing to work with them”. For the seller this means that they can potentially have a larger pool of buyers that can qualify to purchase their home.

The negative aspect of these programs is that they are only available in Rural parts of the United States. This means that these programs are not available for homes in Portland, Vancouver or Salem. USDA is how ever available in almost all of the smaller towns and communities throughout the country. The USDA does provide a search engine to determine if the home that you are looking to buy or sell will qualify for their program. Please go the following link and click on single-family housing under Property Eligibility and fill in the information that is requested. http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do . Below is a map of the Portland and Vancouver. The areas that are shaded “do not” qualify for the program.





The next negative aspect to these programs depending on your point of view is that only moderate and very low-income individuals and families can qualify. Based on the following chart a single person household is considered Very Low Income if they make less than $23,750 a year, a 2 person house hold is considered Very Low Income if they make less than $27,150 a year and so forth. The diagram below is for Portland-Vancouver-Beaverton, OR-WA MSA. Please note that most counties throughout the United States have a different income limits.
1 2 3 4 5 6 7 8
VERY LOW INCOME 23750 27150 30550 33950 36650 39400 42100 44800
LOW INCOME 38000 43450 48900 54300 58650 63000 67350 71700
MODERATE INCOME 43500 48950 54400 59800 64150 68500 72850 77200
38 YEAR TERM 28500 32600 36650 40750 44000 47250 50500 53800

For a more detailed determination of weather you or a client qualify for one of these program based on income click the following link and then click single family housing under Income Eligibility. http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do .

Rural Housing Direct Loan program or Guaranteed Rural Housing Loans?

If you find that you are Very Low Income to Low Income you will be working with the Rural Housing Direct Loan program. Rural Housing Direct Loans are loans that are directly funded and accessed through the USDA Rural Development. These loans come with lower than average fixed interest rates and some may be able to be financed over 35 years.

If you are Low Income to Moderate Income you will be working with the Guaranteed Rural Housing Loan program. Guaranteed Rural Housing Loans are originated by approved mortgage lenders. This means that you will need to work with a mortgage professional or a bank to get access to the Guaranteed program. The interest rates for the Guaranteed program are about the same as interest rate for FHA and Conventional loan programs. The advantage that this program has over FHA and Conventional is that there is NO Monthly Mortgage Insurance and you do not need to put any money down, THIS IS HUGE.

Anytime that you do not have at least 20% to put down when purchasing a home you will be required to either get a 1st and a 2nd mortgage or you will need to pay for monthly mortgage insurance of some kind. With an FHA loan where you are buying a home for $200,000 and putting 3% down your monthly mortgage insurance for the first several years is going to be about $66.00 a month. If you were buying the same $200,000 dollar home with a conventional mortgage and putting 5% down your monthly mortgage insurance would be about $149.00 a month. No matter what, your month payment will be higher if you do not have 20% to put down. The only programs that I am aware of that DO NOT require monthly mortgage insurance for loans with less than 20% down are VA, USDA and some high interest rate loans that have the mortgage insurance built into the interest rate.


USDA does have what is called a One time 2% guarantee fee. This fee can be financed into the loan. For example: You purchase a home for $200,000.00. $200,000.00 X 2% = $4,000.00. The beginning balance of your loan if you did not put any money down would be $204,000.000. Max Loan to Value for USDA loans is 102%. I am not sure if the Direct Loan Program requires a 2% guarantee fee.

Here is an example of a USDA loan that I closed for an Oregon client in August 2008. This is for a new manufactured land home package. The seller / manufactured home dealers paid for all of the buyers closing cost of $4605.44 and pre-paids of $1,893.95. The borrowers were able to buy this property with Zero Money Out of their Pocket.

Total purchase price 193,377.00.
+ One time 2% guarantee fee $3,867.00
_________________________________
Beginning Loan Balance $197,244.00

The borrowers have a fixed 6.5% interest rate for 30 years.

Principle and interest payment of $1,246.72 + taxes of $87.58 a month + insurance of $39.58 a month for a Total Monthly Payment of $1,373.88 a month.

APR 6.679%

Please remember that this is just a very quick over view of just two of the many USDA loan programs that are available. If you would like more detailed information about these and other USDA programs please click on one of the following links. USDA Rural Development Home page http://www.usda.gov/wps/portal/usdahome / Oregon RD http://www.rurdev.usda.gov/OR/USDA / Washington State RD http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

Please feel free to call or email with any questions I will do my best to help you.

Thanks again and good luck.

Ron Hopkins
LoanSource Funding, LLC
16703 SE McGillivray Blvd.
Suite 215
Vancouver, WA 98683
WK: 360-567-2596
Cell: 360-903-7601
Fax: 360-838-6578
Email: ronh@lsfloans.com
WA License Number: 510-LO-33252
OR License Number: ML-2750