Not So Secret, Secret $0 Down Home Loan

Updated: Aug 29, 2020

What do you know about home loans? That you need several thousand dollars? Or what about perfect credit? Does 3.5% down sound familiar?

There's 2 hidden $0 down loan lenders won't tell you at first. They're called a USDA loan and Down Payment Assistance and there's a good chance you qualify.

Why is it so Special?

A USDA loan was created by the United States Department of Agriculture in order to try to help get homeowners in "rural" areas. By "rural" we don't mean way out in the countryside (although that usually does qualify as well), but any area without a huge concentration of residents. For those in the Columbia, SC region; Red Bank, by Lexington High School, and some areas of Oak Grove all qualify.

The most attractive part of a USDA home is the ability to have $0 down. The USDA finances 100% of the cost of the home. They understand many people don't have tens of thousands of dollars to use towards a house and decided to make a way to help a majority of the population into their own homes. This is a guaranteed loan like those of VA home loans which allows most banks and lenders to use this kind of loan.

Perks of USDA

  • $0 Down

  • Usually lower interest rates

  • Depending on lender, can be used for land, rehabilitation, modular, and mobile homes

  • Lower mortgage insurance

  • Directed at lower income individuals and families

  • Can be used for new homes

  • No required inspections

  • Can be combined with KELLER MORTGAGE to get rid of all lender fees (Underwriting, Origination, Loan Fees) Saving you even more money

  • Can include closing cost into the loan

What's The Catch?

  • Preferable 640 credit score (lower may be considered, although)

  • Nothing in collections over the last 12 months

  • MUST be used as the primary residence (can't be used as a rental)

  • Must be a U.S. citizen

  • Cannot make more than 115% of the area's income (Income Maximum)

  • Stable and dependable income (usually 24 months, exceptions apply)

  • Required mortgage insurance

  • At least a 41% Debt-to-Income (Borrower spends no more than 41% of income on debts and bills, not including current rent/house payment)

  • MUST be located in designated "rural" area (check the map below)

FHA Down Payment Assistance

Down Payment Assistance (DPA) varies by states and not many lenders can do it, however this remains an option for those who want a home not located in USDA eligible areas, but have little cash on hand. Specifically in South Carolina, dpa will give a borrower up to $7,000 to use as closing costs or as the buyer's down payment (or both). This is an excellent option as $7,000 covers a full down payment for up to a $200,000 home. This can also be forgivable, meaning as long as the buyer follows the rules, they never have to pay this back.

FHA Catches

  • Preferable 660 Credit Score Minimum

  • Must be used as a primary residence

  • Must be a U.S citizen

  • Must be a first time home buyer

  • Must meet lenders debt to income ratio

  • Must live in the home for 10-20 years (varies by lender and changes)

  • If you don't live in the home for 10-20 years, then you will owe the amount of the forgivable grant

In Conclusion

USDA and Dpa loans are currently some of the best choices for Americans wanting to own a home without the means to undergo a conventional loan. Some lender's won't consider these option unless they are asked too. As a Realtor, I highly recommend looking at these option for anyone who doesn't have at least $6,000 saved up for a home.

Not Sure If You Qualify? Click below (takes less than 1 minute to find out)

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