Monday, June 22, 2015

Looking To Buy A Home? Let The USDA Help!

Money Matters Monday KNOWSY Readers, I hope everyone had a happy and safe weekend as well as a Happy Father's Day!
My goodness time certainly seems to be going by quite quickly, High School and College Graduations are winding down and Summertime is now upon us! For many of you fine folks you are probably planning or have already planned your summer vacation, for others this is the time of year that moving occurs, be it within your same town or clear across the country. This actually leads me to my next post, for those of you who are my regular readers, you know I am always on a search for items that will help you Save Money and if possible Make Money, since I receive quite a bit of emails from different sources which I am a member (via subscriptions/newsletters) this particular article came from the Women's Financial Alliance headed by Sandy Franks, it gives you another option to consider in your Home Search.

Use the government's no money down home buying program
By Sandy Franks

Dear WFA reader,

One of the rules we live by here at the WFA is that we won’t ask or recommend you do something unless we’ve done it ourselves; know someone who has; know the people involved, or have done our due diligence with thorough research.  It’s our “be authentic and true” rule.

So while what I’m about to tell you will surely raise an eyebrow, you can put your skepticism a side for a minute.

I’m going to share with you a way you can buy a home for virtually no money down … and in many cases, not have to pay closing costs AND even get a mortgage at very low interest rates.

The Government Backs This Home Loan Program

Many times WFA readers write in, asking how they can get money to buy a home.  Sometimes members don’t have the 20 to 25% cash needed for a down payment required by banks, or have trouble getting the funds together for closing costs. 

Let’s face it, since the Great Recession, credit requirements for home loans have tightened up, making it hard for many people to buy a home.

If you’re in a similar situation, then you’ll want to check out the mortgage programs offered by the United States Department of Agriculture (USDA). What few people realize is that the USDA provides attractive loans to people in certain rural locations, as an enticement to settle down and develop new areas of the country.

The Department of Agriculture uses population data from the US Census and other factors to determine which areas of the country count as “rural,” and then allows buyers in these areas (who meet a few other requirements) to get a USDA-backed loan from an approved lender.

Most people who apply under the program have success.  Carol McCormack is one of those people.  She was more than thrilled when she got money from the USDA for her new house.  Not only that, but she was able to use the funds to have her home built.  That's right, a custom built home. 

Of her new home, Carol says, “Maybe it is just me but when I walk into the house there is a feeling of love about it.  And here’s the kicker:  Carol is 76 years old.

That’s one of the neat features of the program.  Eligible applicants can use the funds to buy an existing home, build, rehabilitate, improve or relocate a dwelling in an eligible rural area.

What Makes USDA Loans Special?

What makes this program so attractive is that it requires no money down AND still has interest rates competitive with other government mortgage products. For example, FHA loans, the most common type of government loan, require a 3.5% minimum down payment and costly mortgage insurance premiums.

However, USDA mortgages only require a small annual fee (a fraction of the FHA’s rates) and an upfront premium of 2% of the loan amount.  But hold on: That premium can be rolled into the mortgage, giving buyers the option of getting financed with a 0% down payment.

If credit is a problem, well you may even qualify using “non-traditional” credit and you don’t have to have an amazing credit score to get approved either. You should have at least a 620 to 640 credit score, but in some cases, you might be able to use credit references like cell phone, insurance, and utility bills or show a healthy bank balance.

The financing options are ideal for those who want to take advantage of cheap land prices, buy foreclosures, fix up the home of their dreams or just move a little ways out of the city and grab a few acres for raising the kids with more room in a safer environment.

What’s The Catch?

The catch is the Department of Agriculture puts limits on who can get these loans. If you make more than 115% of your area’s median income or already have adequate housing, you’re not eligible for the financing. You’re also required to purchase housing that is “modest in size, design, and cost” and meets various building codes.  

Most important, you must live in a specific area defined by the USDA as rural. But, don’t let that stop you. Remember how I told you the USDA decides which areas are eligible for these loans based on census data?

Well, the Department of Agriculture hasn’t actually updated its map since 2000, and a lot has happened in the last 15 years. Many areas that were previously considered rural have now become regular suburbs.  But that rural designation still makes them eligible areas.

In fact according to a 2010 study by Housing Assistance Council, 97% of the country’s landmass, an area that includes 109 million people, is eligible for a USDA loan. That means about one in three people live in regions that were USDA eligible when the report was published.

If you are considering this option, don’t wait too long. Rumor has it the USDA plans to update the eligibility maps.

Another requirement is people who are buying a home for the first time are required to take a home ownership course. The course is offered on-line or in a classroom style setting. At the end of the course you'll receive a certificate of completion.

But you might wonder if buying a home with no money down is the best thing to do?  It depends.  When you put money down, it allows you to pay a portion of the cost of the house up front, which means you'll be closer to having the house paid off than if you start with no equity in the home.   

And usually having money down helps lower the interest rates on the loan.  In this case, though with USDA money, the interest rates is very low.

I recommend you check the program out. It could be your first step toward owning a home.

By the way, the person we know who researched this is my daughter, Rachael.  Being a newly graduated college student, and tired of renting, she’s using this program for her home search.

Until next time, stay happy, 
Sandy Franks
Founder, WFA, and Crusader for Women’s Right to Wealth

PS - Let us know if you decide to use the program and if you had success buying a home.  We'd love to share your story with others.  Write to us at: 

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Copyright 2015 The Women's Financial Alliance.  All rights reserved.  No part of this report may be reproduced or placed on any electronic medium without written permission from the publisher. The Women's Financial Alliance or its editors and publications do not advocate the purchase or sale of any security or investment or offer personalized advice. Investments recommended in this publication should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company in question.
Women's Financial Alliance PO Box 51 White Hall, Maryland 21161-8982 United States
   Alright my KNOWSY Readers I hope this information will be of some assistance to those of you thinking of buying a new home. I know that I too plan on taking a look at this program and see the which areas of the country are classified "rural" based on the USDA.  

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