Back in the boom times of sub prime mortgages, 100% financing loans were everywhere. However, after the market crashed, these 100% financing loans went away. However, one type of 100% financing still exists, and that is called a USDA loan.
A USDA loan is a government subsidized loan that required NO down payment, and 98% of the time my clients only expenses are the appraisal fee and home inspection (if they opt for it with their realtor).
Many clients are shocked to find out they can buy a home for $225,000 (for example) with NO money out of pocket. Yes, that's right. You can buy a home for nothing.
There are some criteria though which you need to consider.
- A score of 640 is required for automated approval; however, lower scores are potentially approvable as well down to 620. These require manual approval by the State of Pennsylvania.
- Your combined household income must be at or under the maximum limit set for each county determined by the State of Pennsylvania. This amount is typically around $74,000, with a few exceptions in areas of Eastern Pennsylvania.
- If your household is greater than 4 people (including children), there are higher income brackets which allow you to earn more and still qualify.
- The home must be listed as in an "eligible area" as determined by the Pennsylvania USDA website.
- Homes in urban or city areas are not eligible for USDA financing.
- Any money owed to the Federal Government or State will disqualify you from this loan. That means owing back taxes, tax liens, defaulted student loans, etc.
- NO down payment required. Loan can be financed to 100% of the appraised value.
- Monthly mortgage insurance is lower than an FHA loan.
- Very low interest rates since the loan is backed by the government.
- The seller can pay up to 6% of your closing costs in the form of "Seller Assistance".
- Maximum Debt to Income Ratio of 43%, however, a strong candidate can possibly get an exception up to 45%.
- Mortgage insurance sticks on for the entire life of the loan, just like an FHA loan.
- The home must be in an eligible area, which means that purchasing in large metro areas like Philadelphia, Pittsburgh, Harrisburg, Erie, are not eligible.
- A 2% funding fee is financed into the loan for the government.
- The home must pass the same strict safety standards as an FHA loan (meaning no chipped or peeling paint).
- The home must not be an active farm or contain any features of a farm (such as barn, silo, etc).
John Cushma is a hands on Loan Officer from start to finish
For informational purposes only and is not a commitment to lend. Programs, rates, terms and conditions are subject to change at any time. Availability dependent upon approved credit and documentation, acceptable appraisal, and market conditions. Not all programs available in all areas. CrossCountry Mortgage Inc. is a Pennsylvania Corporation headquartered at 22 Rutgers Road, Pittsburgh, PA 15205. NMLS# 1423174 #3029; www.nmlsconsumeraccess.org; Equal Housing Opportunity.