USDA loans were created to help people with lower incomes purchase homes in rural areas. It’s a great program that requires no down payment and minimal closing costs. The minimum credit score qualification is low, however there are income limits per county. I always look at this program as a potential option, however with the income limits and the prices of homes today it’s a challenge to meet the criteria. It is acceptable to receive up to 6% of seller concessions with this loan program which helps with the minimal cash to close.
I recently met with a young couple that had heard about the USDA program as well as the down payment assistance and their concern was not having enough money for a down payment or for cash to close. Unfortunately with their income, there were over the income limit for USDA. She asked if we removed her from the loan if that could work, which sometimes it can with other loan programs, however with USDA we have to use ‘household income’ so they weren’t able to qualify. We looked at the down payment assistance program (DPA) as well, yet the interest rates are higher with those loans and the money you get to help you purchase the home does have to be paid back when you sell or refinance your home. We also looked at the option of a 30 year conventional loan and asking if the seller would pay the closing costs. Comparing all the numbers side by side, that was the option they felt made the most sense for them. I let their realtor know that was the plan and they started looking at homes….and it worked! They just received the mutually accepted offer, they offered above the list price for the amount in closing costs they wanted the seller to pay. They do still have to pay for their down payment which is only 3% of the purchase price and that’s the only money they have to bring to the closing. I’m so excited for them and to be able to help them on their path to homeownership! Are you or someone you know wondering what loan program is right for them? Please reach out to me, I’ll help you make an educated decision.