USDA Mortgage Loan
Where’s the beef? How about a nice, juicy 100% loan with a check for $8000. Mortgage bankers do a considerable amount of USDA loans, and the borrowers are getting in with no money down and cash back at closing.
The United States Department of Agriculture Rural Development division offers attractive loans in order to increase the development of rural areas. In order to qualify, you must meet income guidelines and the property must be in a designated USDA rural area. If you were not planning on buying a farm, you should look at the property eligibility page. I was surprised to see that everything east of I-75 was considered rural, this includes Lakewood Ranch and other areas that are you wouldn’t think of as rural.
For investors, a good property manager in Tampa, Florida can save you thousands of dollars a year.
In order to get the $8000 check, you must be a first-time homebuyer. To be considered a first timer you must not have had ownership interest in a property within the last 3 years. The 8k is not free, it is a loan that must be repaid and will be deducted from your income tax refund.
Here are the advantages of a USDA Loan:
- The government’s repayment guarantee (should the buyer default) allows lenders to be more generous with interest rate offerings and more lenient credit standards than they would be on a comparable conventional loan.
- There is no pre-payment penalty for a USDA-backed loan.
- The mortgage can also be used to purchase some manufactured homes.
- The USDA loan can be used to refinance a home as well.
Here are the disadvantages of a USDA Guaranteed Loan program.
- There is an upfront fee of 2.75 percent of the loan amount. Now, there is a bright side to this – it will be added to the loan so it’s not money you’ll need to pay out-of-pocket.
- There is another fee, amounting to 0.50 percent, that is similar to the mortgage insurance premium for FHA loans or private mortgage insurance on conventional loans. This fee stays in force for the life of the loan and is paid annually.
- Both the lender and the USDA subjects the loan to underwriting so expect closing to take a few weeks longer than other loans.
If you are considering buying a home, make sure you consider future depreciation and buy well below market value. Also, explore all of your options including USDA loans, the property you want may be considered rural and you may get paid to buy it.
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