Loan Programs

Government Loans

FHA LOANS

The Federal Housing Administration was created in 1934 in an effort to bolster homes sales during the Depression. By financially guaranteeing loans, the FHA lifts much of the risk of non-payment and foreclosure from private lenders. It is important to remember that the FHA is not a lender; they just guarantee your loan.

Advantages

    Bankruptcy not an automatic disqualification

    Lower interest rates

    Down payment is less

    Lower mortgage points and other closing cost requirements

    Resale can be made more quickly

    Is backed by the U.S. government

Features

    Down payment required

    Higher upfront Mortgage Insurance Premium (MIP) than on conventional loans but monthly MIP is lower

    Loan Limits are lower than conventional

    MIP required regardless of the Loan-to-Value (LTV)

USDA LOANS

The USDA Rural Housing Service has various programs available to aid low- to moderate-income rural residents to purchase, construct, repair, or relocate a dwelling and related facilities. USDA Rural Housing loan programs allow qualified homebuyers to get loans with minimal closing costs and no down payment.

Advantages

    No down payment requirement

    Property must be located in an eligible rural area

    Closing costs can be added to the loan amount (if the property appraises high enough to include it at up to 102% of the appraised value)

    Loan government guarantee fee with no monthly guarantee fee

    Low interest rates

    Applicants with a wide range of credit profiles may qualify

    Income eligible applicants who do not qualify for conventional financing may qualify

    Families & individuals that have minimal funds for a down payment and closing costs includes first time homebuyers and repeat homebuyers

    Seller concessions – 6% max

    No cash reserve requirement

    No Non-Allowable costs

    No First Time Homebuyer Requirement

    30 Year Loan @ competitive fixed rate

    No limit on gift funds

Features

    Property must be in very good condition and have a high insulation R-factor

    You can not make over 50% of 115% of the median county income to qualify

    Must be able to verify income limits

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Government: USDA Rural Development

The United States Department of Agriculture (USDA) has a mortgage program to support rural and suburban communities for low-income people who want to purchase an affordable home. They will not necessarily be required to make a down payment.

USDA’s Rural Development Guaranteed Housing Loan Program is a no-down-payment mortgage for qualified rural and suburban home buyers only. In 2017 alone, as part of the Rural Development program, USDA helped about 127,000 families purchase and improved their homes.

The USDA Program is a series of loans subject to the determinants of the USDA Rural Development. This program seeks to strengthen the country’s economy, help homebuyers buy a rural home, become homeowners, and improve the quality of life in suburban areas, i.e., those away from the big cities.

The USDA Program is based on providing families with clean, safe, and adequate property for life. Of course, there is much more to the program than the USDA mortgage loan: they also have loans for home repairs, for remodeling and reconditioning, for improving the efficiency of the home, and even for starting the construction of new properties

According to its website, since 2009, the USDA Program has helped more than one million families – some four million Americans – move to remote locations. This increases the price of those properties, fosters community growth, and raises the employment rate, thus activating the economy.

How can I qualify for a USDA mortgage loan?

While there is an income limit to apply for this type of loan, it varies depending on the county where you live, so support eligibility cannot be generalized. You can refer to the USDA map and chart to find your city.

Generally, other requirements include:

  • Have U.S. citizenship (or permanent residence, if not). This requirement is not flexible in either case.
  • Have the ability to make a monthly payment that includes principal, interest, insurance, and taxes. This monthly payment is calculated as a maximum of 29% or less of your monthly income. On the other hand, it is determined that your other monthly payments cannot exceed 41% of your income. However, the USDA may consider a higher debt-to-income ratio if you have a credit score above 680 points.
  • Demonstrate that you have a fixed and reliable income. You’ll usually be asked for pay stubs and bank statements for the last 24 months or more.
  • Have a good credit history. That is, no accounts converted to collections in the last 12 months, among other criteria. If you can show that your credit was affected by temporary circumstances or circumstances that were out of your reach – like the pandemic, for example – you may qualify even if you don’t have a good or stellar history.
    Applicants with a credit score of 640 points or higher receive simplified processing. Those below this point must meet much more stringent conditions. However, you should know that it is possible to qualify, even if you do not have the best credit history in the world. It all depends on your particular case.

What is Rural Development?

Rural Development is as USDA mortgage loans are popularly known. Through rural credit, the U.S. Department of Agriculture helps qualified low- and middle-income families purchase a spacious, livable home suitable for living on the outskirts of large cities.

Of course, the program includes some requirements that apply to the borrower or applicant and the home in question: both must meet the eligibility requirements to be eligible for financing.

How does a USDA mortgage loan work?

Now that you’re clear about what a USDA mortgage loan or rural credit is and what the USDA Program is, and who administers it, it’s time to talk about what types of financing are available. What you need to know is that there are three types of USDA mortgage loans, namely.

Guaranteed Loans: USDA guarantees a mortgage issued by a participating local lender, similar to what happens with an FHA or VA (Veterans Affairs) backed loan. This will allow you to access a low mortgage rate, even if you don’t have enough money for a down payment. However, if you put little or no cash down on a loan, you will have a disadvantage. What? Paying a mortgage insurance premium.

So, if we look a little further than this classification, we might conclude that the USDA issues mortgages, preferably, to those applicants who are most in need, financially speaking. This means that they choose an individual or family who:

It does not have decent, safe, and sanitary housing to live in.

Cannot get a mortgage loan through traditional channels.

Has an income level adjusted to the limit that the institution handles as “low income” or even below this amount? (It will depend on the county where you live).

What are the suitable locations for the USDA mortgage loan?

Metropolitan areas are generally excluded from the USDA program, but there may be some locations with good opportunities in the surrounding suburbs. As for rural areas, all of them are eligible.

How do I apply for a USDA mortgage loan?

To apply for a USDA-guaranteed loan, you must find a lender participating in the program.

USDA Rural Development may seem like a type of financing from a distance that only targets farmers and ranchers, but it has nothing to do with it. Eligibility focuses on the income limit and the location of the home.