Want to buy a rural home? Like No Down Payment? Then this mortgage loan is for you!
The US Department of Agriculture administers a means tested mortgage loan guarantee program called the USDA Rural Development Loan. Commonly referred to as just a USDA Loan, RD, or Rural Housing loan.
This USDA loan is designed to provide low cost housing for those wanting to live in rural areas, and is primarily for first time home buyers, although you do not need to be a first time home buyer to use this program. Prospective home buyers can apply with a MN, WI, or SD area USDA Home Loan Lender like us, who will process, underwrite, and close your mortgage loan.
You DO NOT need to go through a USDA office to get this loan.
This is not a “farm” loan. You can not use it to buy a farm. Rather it is a mortgage loan that is designed to support housing in rural communities. Not all “rural” areas are in the middle of a cornfield. Many areas of Minnesota, Wisconsin, and South Dakota qualify. We can help you determine if your area is eligible
1) Do a USDA Income Eligibility check. Does you household income qualify
2) Do a USDA Property Eligibility check. Is the house in an eligible rural area?
If your income qualified, and the home is in a USDA eligible area:
3)Fill out an online USDA Loan Application. Get lender pre-approved in a few business hours.
Zero down payment - You can finance 100% of the purchase price
Roll your closing costs into the loan (known as seller paid closing costs, or seller concessions)
Very cheap mortgage insurance compared to other mortgage loans options
Homes more affordable, and more people qualify because of low PMI
Good credit or better required - Doesn't need to be perfect, but bad credit not OK (less than 620 score)
USDA Income Limits: All USDA loans in MN, WI, or SD have household income limits to qualify. The loan is a "means tested" program, which states that you or your family can't make too much money. There are allowable income adjustments for minor children (family size), child care expenses, and elderly family members. Most moderate to middle income families WILL qualify. You can easily check income limits for your family size, state, and county on the USDA Loan income eligibility web site.
USDA Rural Areas Only: Basically, a rural area for the USDA loan is anything outside a major metropolitan area. This may be closer to the big city than you think, so be sure to check the property eligibility map to make sure the area you wish to buy a home fits USDA's property location guidelines.
No Down Payment Required – Unlike conventional loans and even FHA loans, USDA Home Loans do not require any down payment. This is especially beneficial for first time homebuyers. Saving up a down payment can be very difficult. Utilizing a USDA Home Loan means that is no longer an issue.
Type of Home: The home must be on a publicly maintained road, or in a development with private roads. It must be a single family home (no duplexes), must be owner occupied (no investment homes), and may not produce income.
No business can operate on the property. A hobby farm is OK, but agricultural land that is getting farm income (even from renting part of the land), or any property that will be farmed is not OK.
Properties that have a significant number of building other than the home itself, such as pole sheds, old barns, and old silo's can be an issue with the USDA Loan, so be sure to contact us to discuss any questionable properties BEFORE signing a purchase agreement.
Closing Costs: All mortgage loans have closing costs. Lender fees, appraisal, credit report, title company, state taxes, origination fees, and more. These are the buyer costs that need to be paid at closing. The best way is always for the buyer to pay cash. But as most first time home buyers have limited funds, so this can be a problem.
You are also allowed with a USDA loan to roll the closing costs into the loan with "seller paid closing costs", also known as seller concessions. Or you can pay them by taking a slightly higher interest rate. Under these two options, you are still paying for the closing costs, but you are essentially paying over time versus cash out of pocket today. How cool is that?
Seller’s Concession – A seller’s concession allows the seller to pay for some (or all) of your closing costs out of their proceeds from the sale of the home. Couple that with 100% financing that is available, and you can be in a home without any of your own money, meaning you can keep your money in savings to cover any expenses that arise.
Financed Closing Costs – On some purchase transactions, foreclosures and short sales in particular, a seller’s concession is not possible. A USDA Home Loan allows the financing of the closing costs even if the seller will not agree to a seller’s concession. All of the closing costs (except discount points) can be financed, up to 100% of the appraised value of the home. This is extremely beneficial when a seller’s concession is not an option, but is hard to depend on, because we don't know if it is available until AFTER the appraisal is completed.
The next "financed" option is by taking a higher interest rate. For example, if you take the current interest rate and increase it about 1/2%, the lender can eliminate most, if not all your closing costs.
If you have any of the following items, you automatically do not qualify for the USDA loan in MN, WI, or SD. You may qualify for other loans (like an FHA loan), so be sure to contact us for more information on other loan options:
|DON'T QUALIFY FOR A USDA Loan? There are other home loan possibilities. DON'T ASSUME you can't qualify for something else. Call (651) 552-3681 to discuss your personal situation. For example, with an FHA loan, a bankruptcy only needs to be two-years old, and we can offer loans with a credit score of 620. We also offer down payment assistance loans, that require only as little as $1,000 of your own money. If you are active military or a Veteran, a VA Home Loan only requires two-years past a foreclosure or a bankruptcy.|
We hope this information is helpful. We would be proud to help your home buying dreams come true with a zero down payment USDA rural development loan. Apply online today, have an answer tomorrow.
"Thanks for all your help and explanations. The people at the USDA office had me confused. I'm sure glad
I switch to you for my USDA loan"
Mary M. - Aitkin, MN "Both you and the USDA loan rock! I bought my dream house with just $250 total out of my pocket. I will gladly recommend you to anyone who is also seeking a home mortgage."
-Tim W. Hudson, WI
You can check current USDA Loan Interest Rates for MN, WI, and SD. Under loan type, select FHA. The FHA and USDA rates are the same. You can also complete our Quick Qualifyer form, to get a Loan Estimate sent directly to you based on your personal situation.
Tweets by Joe Metzler, Senior Loan Officer. Tweets are Joe's personal comments and ramblings, and do not necessarily reflect those of his employer, Mortgages Unlimited.
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Our services available only for properties located in Minnesota, Wisconsin, and South Dakota. Licensed as Mortgages Unlimited, Inc. NMLS # 225504. As a Lenders One partner, we are part of the 3rd Largest Retail Mortgage Originators in the country. We are consistently ranked as one of the top mortgage lenders in Minnesota by Minneapolis St Paul Business Journal. Any use or duplication of any materials is strictly prohibited. All images, text, and materials Copyright © 1998 - 2016 Joe Metzler. This is the private web site of Joe Metzler, NMLS #274132. All Rights Reserved.