Down Payments On The USDA Guaranteed Home Loan
USDA Guaranteed Home Loans do not require a down payment to secure your home. The USDA program is the only one sponsored by the U.S. federal government that offers a 0% down payment to qualified home buyers.
Among the largest challenges for people who are purchasing a home is the need to deliver down payment money on the day of closing. When you are looking at private bank loans, you usually have to deal with a down payment of up to 10%.
The USDA Guaranteed Home Loan program is unique in that it offers you a chance to get a home loan that does not require any down payment out of pocket. Instead, you may be able to finance up to 102% of the total value of the home, which includes various fees.
Because of the fact you don't have to worry about a down payment or about fees, you can focus on making the principal payments that will reduce the overall cost of your home.
What makes a USDA Guaranteed home loan different from another type of loan? These loans are backed by the federal government. The lender will be able to recover much of their potential loss if the borrower is not able to maintain the loan according to its requirements.
Because the government guarantees these loans, lenders are empowered to provide loans to people who do not qualify for traditional mortgage loans.
Remember, the USDA Guaranteed home loan is not provided to you directly by the government. Instead, you select a private lender whose loan program meets the criteria set forth by the USDA.
Just because all these lenders meet certain standards, it does not mean they are all the same. It is still important to compare different lenders so that you can get the best deal possible on a loan.
There are some key reasons why you would want to consider this program:
- Fixed interest rates offered by the program are highly competitive compared to other options
- You don't have to put down any money on the home's value and can finance the whole home
- You will be able to get affordable loans at a standard term of 30 years to pay it all off
The fixed rate offered by the USDA home loan is one of its most attractive features. Because there are no adjustable rate options in USDA home loans, you never have to worry that your rate will change and that you will end up surprised by any differences in payments.
There is only one fee associated with generating this kind of loan, and it is a funding fee that is paid a single time throughout the whole lifetime of your loan. This puts you in an advantageous position when it comes to paying off your mortgage principal, not fees.
A USDA Guaranteed home loan stands head and shoulders over other loan options, even those that are supported by the federal government, thanks to its lack of any down payment needed.
Other mortgage loan options, including private loans, will typically require you to pay up to 10% of a home's total value in terms of a down payment to be provided when the mortgage closes.
Popular federal programs such as the FHA home loan program also require down payments.
Just to give one example, a home that has a $100,000 value would typically require a down payment of $3,250 or more under the FHA program. On the other hand, the USDA down payment amount would be zero.
Likewise, on a USDA loan, potential seller concessions are limitless. The only requirement is that the seller's concessions be considered reasonable. If you need 4%, 6%, or perhaps even more from the seller to cover required costs, it is possible under USDA funding.
Getting a USDA loan is not difficult but getting the best possible terms for your loan requires the help of true experts who have gone through the process many times before. That's us!
We help you get superior rates by making sure you use the best lender for you.
There may be some fees, such as earnest money, required in the process of getting a home with a USDA Guaranteed loan. However, there are also many advantages that you can benefit from:
- Complete financing of the home value and potentially any fees
- Low mortgage insurance premiums and a low, fixed interest rate
- Competitive closing costs and a unique zero dollar down payment
- The potential to qualify at any reasonable credit score
- No penalties for paying your loan off in advance
How do mortgage loan insurance premiums compare with this loan option? They are much lower than the 3.5% down payment you would face if you got a loan under the FHA loan program.
What are USDA loans all about?
A USDA Guaranteed home loan is a loan that is backed by the federal government's Department of Agriculture. It offers a wide variety of advantages for people who have low or moderate income, a steady source of that income, and long-term residence in a rural area.
What significant benefits are found in this loan program?
There are many great benefits, including a competitive fixed interest rate, easy credit qualification, and no pre-payment penalties. However, the most attractive benefit is the fact that no down payment is required.
What money do I need to put down to get a USDA loan?
In many cases, it is possible to purchase a house on a USDA loan without any money of your own. Depending on the value for which the house appraises, it may be possible to finance closing costs and other fees as part of your loan or get seller concessions.
Do I need a down payment to qualify?
No. There is no down payment on a USDA home loan.
How much money can the seller pay?
The seller can pay (concede) any amount as long as it is deemed reasonable.
What is the maximum amount I can borrow?
There is no maximum loan amount, but your personal loan eligibility is based upon the debt to income ratio created by your loan.
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