If you are unaware of the USDA loan, yes that is the United States Department of Agriculture lending money , it is truly one of the best mortgage programs out there for borrowers that are unwilling to or have no funds available for the mininum 3.5% deposit for an FHA loan which is one of the most common loan programs for first time home buyers. The commonly called Rural Housing mortgage must fall within boundaries set by USDA. In the midwest suburbs , such as the Nashville real estate market, this is lesser an obstacle than many areas of the United States to find a house that are within the set boundary limitaions . However in mostly urban area it might not be as even possible . The rural housing mortgage is one of the most buyer friendly programs for people who wish to own a home with zero money down . If you are able to negotiate with the sellers to pay for all closing cost and prepaid taxes and insurance (usually 2.5-3% will do it), individuals can literally purchase a home with nothing other than a good faith which can get refunded at closing. The best part is that there is no monthly mortgage insurance which save borrowers $100 or more a month. There is additionally no upfront mortgage insurance premium like FHA loans which is 2.25% of the loans amount. However there is guarantee fee like a VA loan that on Sept. 8, 2010 was announced to be increased from not 2.054% to 3.5% by USDA head Tammy Trevino when announcing continued funding for the mortgage program. Just like an FHA or VA loans this fee can be and typically is charged into the loan. To put this into perspective, in comparing to a FHA mortgage , the increase in the funding fee (USDA) in comparison with the upfront Mortgage insurance (FHA) will quickly balanced by a FHA loan’s .55% month mortgage insurance (.55% of loan amount/12). So actually after just a few years a owner will be better off with the USDA loan by saving mortgage insurance premium every month .
