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How to get 100% financing without a VA Loan

Posted by Susanna Haynie on September 15, 2018
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100% Financing with USDA Loan

USDA Loan is a great alternative to a VA Loan which also has a $0 Down Payment feature. A USDA loan might be for you if you qualify under these requirements!

What is a USDA loan?

USDA – what does that make you think of? Most people think of beef or agriculture when they hear the term USDA but many people don’t realize the USDA also helps with home lending. Did you know that you can get 100% financing when purchasing a home with a USDA loan?  The most popular and well known program for 100% financing is a VA loan. It’s a great program – but what can you do if you are not qualified for a VA loan? You can look for grants or for special loan programs that would allow you full 100% financing. Only a few have ever heard about a USDA Loan.

A USDA loan is issued through a USDA loan program, under the umbrella of the United States Department of Agriculture. In fact, you’ll find several of the programs available interesting:

(in all programs you HAVE to occupy the home you own)

  1. The Buy/Build direct loan program: for low and very low income buyers, who can qualify for a “502 subsidy” loan with an interest rate as low as 1%.
  2. The Buy/Build guaranteed loan program: This is very much like a VA loan or an FHA loan, which is backed and guaranteed by the government entity and 100% financed.
  3. The Home Repair Loan or Grant: This program only provides loans to very-low income home owners and you may use the loan to repair, improve or modernize your home. Elderly, very low income homeowners may qualify for a grant to remove health and safety hazards in the home they occupy.
  4. Refinance your current USDA loan: you have to fulfill requirements (of course), one of which is to have been current with your payments for at least 12 months, and using the USDA Streamline Assist Refinance must save you at least $50/month.

For all questions contact your USDA lender. If you need to speak with a USDA qualified lender, click here to see USDA approved direct lenders. Want to know if your income qualifies? Download this PDF.

Pros and Cons of a USDA Loan

Pro:

  • We already mentioned the 100% financing.
  • You can also finance larger acreages than your typical conventional or FHA loans allow.
  • Depending on your lender, you can get a competitive interest rate.
  • No minimum credit score, but your loan will have to go through manual underwriting to be approved.
  • While there are specific geographic areas that will qualify for a USDA loan, they are painted with a very wide brush and many rural areas actually do qualify. In Colorado, basically the main urban areas do not qualify. Type in your address here, if you want to make sure if your purchase qualifies.
  • You can finance a 15 OR a 30 year mortgage.
  • You are allowed to already be a home owner, you just can’t already have a home financed with a USDA loan.

USDA eligible areas

Cons:

  • You have to meet the income limits set by the USDA (download this PDF to see if you are eligible).
  • You have to have a credit score of at least 640 to go through automated underwriting for approval.
  • Borrowers have to pay an annual fee for the life of the loan (0.35% in 2018).
  • Borrowers have to pay a 1% (2018) upfront funding fee–very comparable to the funding fee of a VA loan.

Requirements:

  1. You will need a satisfactory credit history.
  2. You will have to be an American citizen or a legal resident.
  3. The home has to be your primary residence.
  4. You have to meet the income limits set by the USDA.
  5. The loan limit is in 2018 $289,000 for 1-4 person household, $391,000 5-8 person household.

Interested in learning more? Click the picture below to schedule a free 30 minute Q&A call with me:

Click here to schedule your free personalized Q&A call with Susanna Haynie

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