The Zero Down Payment Mortgage Program Is Now Even More Affordable

Posted by Laine Smith on 10/10/16 1:30 PM

Topics: Purchasing A Home Saving Money First Time Home Buyer USDA Loans Loan Types Mortgage Insurance home buying Mortgage Goals Mortgage Rates

If you’ve heard of the USDA Rural Development Guaranteed Loan Program, you know that it’s an extremely affordable mortgage program, boasting several benefits for first-time and repeat homebuyers. As if the zero down payment requirement and lower-than-market interest rates weren’t enough, USDA loans became even more affordable at the beginning of this month.

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On October 1st, 2016, the annual and upfront fees associated with the USDA Guaranteed Loan Program were significantly reduced:

            Upfront fee (financed): Changed from 2.75% to 1.00%

            Annual fee: Changed from 0.50% to 0.35%

The upfront fee alone would save a homebuyer purchasing a $175,000 home over $3,000. The reduction of the annual mortgage insurance premium would also result in a lower monthly mortgage payment for homebuyers purchasing with a USDA loan.

According to HousingWire the reduced fees were adjusted due to historically low borrower delinquency and foreclosure rates. USDA Rural Housing Service Administrator Tony Hernandez told HousingWire, “Excellent overall performance in our Single Family Housing Guaranteed Loan Program means we can charge less for the life-changing opportunity to own a home.”

Other benefits of the USDA loan program include:

  • Lower-than-market interest rates. USDA loans are insured by the U.S. Department of Agriculture, which gives borrowers the benefit of a low, across-the-board interest rate that does not vary based on the borrower’s credit score or down payment, as it does with conventional financing.
  • Flexible credit guidelines. This government-backed loan also allows some borrowers with limited credit histories to qualify for home financing using non-traditional credit tradelines. Payment histories from rent, utilities, cell phone bills, etc. can be used to build a borrower’s credit history.

The USDA loan program is available to both first-time and repeat homebuyers and although you don’t have to live in a “rural” area, you must live in a smaller town – typically somewhere with a population less than 20,000 – to be eligible for a USDA loan. Other income, debt-to-income and home purchase conditions apply. To see more USDA loan eligibility requirements, click here or contact one of our mortgage bankers

Interested in purchasing your first home in the near future? Download our free Mortgage 101 Handbook for everything you need to know about preparing to buy your first home.

Download: Mortgage 101 Handbook

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