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Many buyers don't realize that they can utilize USDA home loan programs for 100% financing; even the cost of inspections, closing costs and pro-rations can be included in the loan. With low rates and no mortgage insurance, this is an amazing program. I recently spoke with a buyer who told me he was going to rent because he didn't have enough money saved for a down payment to buy a home. As strange as it sounds, I explained to him that it would cost him more cash out of pocket to rent a home than it would to own one. A rental home typically requires the first month's rent and a rental deposit equivalent to one month's rent. In his case this was going to be about $2,600. I had just worked with buyers who bought a home for around $170,000 with a USDA loan. They had put up a $500 earnest money deposit, had a septic inspection, pest inspection and roof inspection billed to escrow. At the closing, they received their $500 deposit back. It was a true no-money down purchase and their rate was 4.75% fixed for 30 years. Their total payment was around $1,160, which was less than the $1,300 my new client was going to pay to rent a similar home.
FHA loans allow loans up to 96.5% of the home's purchase price and allows sellers to contribute toward the buyer's closing costs. FHA, like USDA, is more flexible on their qualification standards. There have been rumors that the FHA Access program may be returning, which allowed buyers to finance their down payment as well. Many potential buyers think they can't buy because of a low credit score or the lack of a down payment. If you are a buyer with the desire to buy, you at least owe it to yourself to look at the options that are available to you and then make a rational decision. FHA loans in our area are allowable up to a loan amount of $423,000, so they are an excellent option for a wide range of buyers.
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