Right now, only two mortgage programs are available in the country which guarantee 100% financing. The first one is the VA loan, backed by the Department of Veteran Affairs. This is a no down payment 100% financing program. However, this particular mortgage program is limited to the active armed personnel and the veterans. The spouses of the veterans are also eligible for this program.
The other 100% financing program is the USDA loan, insured by the Department of Agriculture and Rural Development. This is also called the Rural Housing Loan. But, this program is not only concentrated in the rural areas but some suburban areas are also covered under this loan. The aim of the USDA loan program is to assist the smaller and rural communities of the country prosper by making property more affordable. If you are willing to purchase a house in a qualified USDA area, you need to fulfill some eligibility criteria related to income and other financial parameters.
What are the advantages of a USDA loan?
USDA loan is insured by the federal authority and in order to qualify for this mortgage the home should be located in a designated USDA rural area. Anyways, there are several advantages of this loan.
• Unlike the traditional mortgages, here you are not required to make any down payment. You can obtain financing worth of 100% of the purchase price of the house. This particular advantage has made USDA mortgage a very attractive choice for you.
• The annual mortgage insurance fee charged for this loan is 0.40%. This is much less than the private mortgage insurance (PMI) charged for a comparable conventional mortgage.
• There is no limit on the amount of money that you can borrow through this channel. So, at least theoretically it is possible to borrow more money through this route than through other mortgage programs.
What are the qualification criteria for a USDA loan?
USDA loans are not issued by the USDA. Rather these loans are insured by the USDA. The aim of the mortgage program is to help increase homeownership in the rural areas of the country. Anyways, to become eligible for this loan, you need to meet the following conditions.
• When you apply for a USDA loan, the underwriter checks your credit situation. The underwriter checks whether or not you have an unblemished credit record over the past 1 year. In other words, you should have decent credit so as to qualify for this loan.
• To become eligible for this loan, your income should not cross the limit set for the county where you are actually purchasing the house. However, you have to prove that you are continuously employed at least for the past 2 years.
• The area where you are purchasing the property is very important. The property must be located in a designated USDA rural area.
The aim of the program is to foster homeownership in the underdeveloped areas of the country. In some situations, the qualification criteria are relaxed by the lenders.