There are currently only two ways to get 100% financing for a single family owner occupied home in the current environment. The first method is a classic VA home loan that allows no money down financing with market interest rates. The VA loan requires the borrower to be an eligible veteran and is a great way to obtain 100% financing. The down side is that not everyone qualifies for VA home loans.
The second method is a source that you might not think of when it comes to obtaining no down payment home loan When most people think of the USDA (U.S. Department of Agriculture) they do not think of home financing, but rather cattle, farming, etc. I bet you would be surprised to learn that the USDA offers one of the best loan programs available and really the only loan of its kind.
The U.S. Government has appropriated funds to the department of agriculture rural development division to promote growth in rural areas. They guarantee loans so that home buyers can purchase single family homes and condos in rural areas with no down payment. There are restrictions and guidelines for USDA financing eligibility. The USDA loan can only be used to purchase single family owner occupied homes in eligible areas and the borrower’s income must not exceed the local area moderate income guidelines. Recently these income guidelines have been increased to allow more borrowers to qualify for the program.
It may surprise you to learn how many towns and properties around you are eligible for USDA financing. It is important that you search for homes with the financing in mind to make sure that you are looking for homes in eligible areas. The reason you may not have heard much about this loan is because not many loan officers know how this type of loan works so they ignore it all together. USDA loans are a bit more complex than the conventional loans they are used to originating.
It is very important to make sure you find a financing professional who understands and knows how the USDA loan works. Since automated underwriting is typically not an option as it is on conventional financing, a complete and correct loan package must be submitted to insure a trouble free and timely closing. It is important to use a USDA trained loan officer. For links to short training videos as well as eligibility tools, please see the resource box below.
Mike Dell’Ovo is a mortgage adviser who has been helping consumer with USDA financing since 2003. If you would like more information on USDA Rural Financing or would like to check your area and income eligibility, please visit to apply visit secure USDA Loan Application Also for a Video and to use the USDA Eligibility Tool.
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