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No money down loans, part II
by Annie Christian
Dec 23, 2011 | 1550 views | 0 0 comments | 15 15 recommendations | email to a friend | print
Annie Christian
Annie Christian
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What could be a better Christmas present for you and your family than a new home with a 100 percent loan? As I’ve mentioned before, with so many people struggle to come up with their down payment it’s understandable that this could be a financial obstacle, especially during the holiday season when money is tight. In my previous column, I introduced Veterans Administration (VA) loans for veterans as one example of a “no-money-down” loan. Today, let’s talk about another type: the USDA loan.

Q: What is a USDA loan?

A: USDA loans are guaranteed by the United States Department of Agriculture Rural Development Department. These loans are provided to buyers who meet that department’s requirements. One of these requirements is that the homes a buyer is considering must be in a specific area, generally a less populated one. In Washoe County, these areas include Cold Springs, most parts of Red Rock and some of the outer areas of Spanish Springs. These loans are also valid in most of the outlying areas of Reno, such as Fernley, Washoe Valley and Fallon.

Q: What are some other USDA qualifications?

A: USDA is a 100 percent loan. This means that there is no down payment. USDA will allow the entire amount of the purchase price to be financed. These loans carry mortgage insurance, much like an FHA loan. They allow a small amount of the mortgage insurance to be financed and charge a nominal, monthly fee.

USDA does impose income limitations which vary by county. For Washoe County, the annual income limitation is up to $81,850 for a family of four and $108,050 for a family of five to eight. This income limitation fits many families in our area. The income is calculated using the combined annual income of all the employed people in the household. The USDA requires a credit score of 640 for the qualifying buyers. You do not have to be a first-time homebuyer to qualify for this program.

Q: How does a USDA payment compare to an FHA payment?

A: If the home you are considering is located within a USDA designated area, you might want to consider this loan option in lieu of an FHA loan that requires a 3.5 percent down payment.

Consider this scenario: The home you are interested in has a purchase price of $150,000 with a $50 per month fire insurance premium, $50 per month HOA fee and $167 per month for property taxes. Both options will be calculated at a 4 percent interest rate for 30 years. The financed portion of the mortgage insurance will be calculated into the purchase price for both loans, also.

Some FHA loan and USDA Comparisons.

• USDA monthly payment with no money down would be $1,034.00.

• FHA monthly payment with 3.5 percent down payment would be $1,103.

Now for the same scenario at a $200,000.00 purchase price:

• USDA monthly payment would be $1,291.

• FHA monthly payment would be $1,382.

As you can see, the monthly payment is less with the USDA loan even with no required down payment. This is because of the reduced monthly mortgage insurance fee. Contact myself or another professional real estate agent to see if the home you are interested in buying is located within the USDA area.

Even amidst the hustle and bustle of the Christmas holidays, this is the perfect time to research the many loan options that are available to transform you from cash poor renter to happy homeowner. Right now the housing market is on your side and it seems like there is something out there for everyone. Give yourself the best Christmas present ever. Buy a home, build equity and create a stable future for the coming New Year. I wish you all a happy holiday season and a prosperous 2012.

Annie Christian is a real estate broker and owner of The Annie Christian Real Estate Group. She helps with everything from buying and selling to foreclosure and short sale. To submit a question, call 351-5117. Her website is www.anniechristian.com.
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