USDA loans (US Department of Agriculture) aka Section 502 loans are an excellent mortgage vehicle for those who do not have money to put down but have decent credit ratings. Typically a credit score over 600 will get the loan done. A score between 580-600 will come under much heavier scrutiny but will not rule out the borrower.
You heard that correctly...with a USDA loan you can do 100% financing!
These loans are typically used to help low to moderate income households purchase homes in rural areas. These loan products are backed by the Federal government.
In order to qualify for a USDA mortgage loan you can only have an income up to 115% of the median income for the area you are interested in buying a property.
The guidelines also include repayment viability based on P.I.T.I (Principle, Interest, Taxes, and Insurance) divided by gross monthly income being less than 29%. Total debt divided by gross monthly income must also be equal to or less than 41%.
One of the other great benefits of the USDA loan is that there is no mortgage insurance required. This can save the borrower quite a bit of money!
In my experience, unless you are in a heavily populated city the definition of rural is pretty loose. Many areas that you may not consider to be rural in your mind may qualify for a USDA loan. Areas that have a population under 20,000 will probably be ok in most circumstances.
It would be a good idea to check with a qualified mortgage professional to see if a USDA loan could work for you. Not all lenders work with these type of loan products as they are more paperwork intense.
For additional information on USDA loans I would suggest visiting the USDA loan website (click here).
If you are located in Massachusetts and want to know if you qualify based on the income limits for a specific area you can visit Massachusetts USDA offices which can provide you with the local income limits based on the county that the home is located in.
If you are located in another state here is the link to the USDA State & local offices.
If you find that you do not meet the income requirements for a USDA loan you may want to think about an FHA loan. There are no income restrictions with an FHA loan and as of January 1st 2009 you will only need to have a 3.5% down payment.
I have noticed a lot of misinformation lately about the lack of mortgage money available. It seems the media loves to promote the doom and gloom of the Real Estate market. While it is true that mortgage lenders have really tightened their belt and are not lending to anyone that walks into their office, anymore there is plenty of funding available to those that have a job with a steady income and a decent credit rating. So don't assume you can not get a loan!
This is one of the best times in our history to buy a home. It is rare that we have seen an interest rate environment where rates are so attractive, combined with a significant drop in housing prices!
Once you have a mortgage loan and you are in your new home, there are tax deduction to remember when getting a home loan.
This is a handy list of items you will want to remember come tax time in April.
The above information on USDA Loans another mortgage option for low to no down payment was provided by Bill Gassett, the team leader for the #4 RE/MAX Team in Massachusetts in 2007. Bill can be reached via email at firstname.lastname@example.org or by phone at 508-435-5356. Bill has helped people move in and out of many Metrowest towns for the last 22+ Years. Bill's office is conveniently located in the center of Hopkinton MA at 77 Main Street.
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