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How Much Money Do I Need To Buy a House
USDA loans do not require any down payment, and you can cover closing costs with seller concessions of up to 6%. Seller concessions are the credit sellers offer homebuyers as an incentive so the homebuyer does not have to come up with any money on a home purchase with USDA loans.
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3 Replies
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USDA loans are a great program for people who do not have a down payment and also fall within the USDA income limits
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The main problem we run into with USDA loans is the debt-to-income ratio cap of 29% front-end and 41% back-end, non-occupant co-borrowers not allowed, and cap on household income. Other than that, it is a great loan program.
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Overview of USDA Loans
USDA (United States Department of Agriculture) loans are aimed at helping low to moderate earners become homeowners in rural and suburban regions. Since this is a government-sponsored mortgage, it comes with some backing. Detailed below are some features regarding down payments, seller charges, and closing costs:
Key Features of USDA Loans
No Down Payment Requirement:
100% Financing Options: USDA loans allow borrowers to finance 100% of the house cost. There is no need for a down payment. This is suitable for people who do not have very good savings.
Seller Concessions:
Closing Costs Covered: The buyer does not fully bear the closing cost on the property awarded under the USDA scheme. The closing seller pays up to six percent of the cost. With such seller contributions, the home buyer will not need to carry so much cash when closing a deal with a seller.
Incentives for Buyers: Closing seller contributions covering some or all of the upfront costs of buying a home, such as origination fees, title and closing insurance, and appraisal fees, will greatly assist homeowners in handling these costs.
Eligibility Requirements:
Location and Income Limits: To qualify for the USDA loan, the specific site has to be located in an eligible rural region, and the mortgage being applied for has to be below certain income constraints (which stretch out to about 115 % of the regional median salary).
Mortgage Insurance:
Guarantee Fee: With USDA loans, as with PMI, an initial guarantee fee and an annual charge that helps to sustain the program will be incurred. Such charges can be included in the total loan due.
Thanks to generous seller subsidies, USDA loans are a good solution for qualified borrowers interested in buying a property and willing to incur minimal closing costs. This program is especially helpful to the rural and suburban poor, who may otherwise find home ownership out of reach. It is wise to always speak to a mortgage professional for further understanding of qualifications for USDA loans and their specifics.