100% Financing - Yes, It Still Exists!

Much "to do" has been made over the recent housing legislation that has eliminated the use of seller funded DAPS (down payment assistance programs). I can say this - HUD has been against these programs for years, and the new bill was their way of finally getting rid of them - at least for now. But do not fret for too long, as this is not the end all-be all. 100% Financing is alive and well.

For years (at least 20) there has been a 100% financing loan available called the USDA Guaranteed Rural Housing Loan. That's right, the United States Department of Agriculture. It's called the guaranteed loan because like its FHA counterpart, the loan is made by the bank and guaranteed (insured) by the USDA (although the USDA does make direct loans). And you don't have to be a farmer, own a cow, or live on 20 acres to be eligible. Most Lenders and banks did not want to bother with this loan because there are income as well as geographic restrictions to this loan. Also, it was much easier to just use FHA and a seller funded DAP. Well, those days are over, at least for now.

Realtors and lenders alike have been scrambling to find an alternative to FHA financing with nothing down, and right now, this is it. It does come with several caveats though. Here's the breakdown, in a nutshell:

1. This is an income sensitive program. You can not make more than 115% of the HUD median income for the area (county) you are trying to purchase in. Many borrowers will not exceed this limit. For example, a married couple with one child can make upwards of $70,000.00 per year and still qualify. (referring to Pasco County Florida) Not bad for a low income program.
2. This program also has geographical restrictions. The program is intended for homes in rural areas, but you would be surprised to see what qualifies as rural. Many suburban areas qualify. You can check the property's eligibility by going to this link: http://eligibility.sc.egov.usda.gov/eligibility
3. The program is for primary residences only; sorry, no second homes.
4. Fixed Rate only - 30 Years.
5. 102% Maximum financing - 100% of purchase price plus 2% guarantee fee.
6. Maximum 6% seller contribution allowed towards buyers closing costs.
   
7. No Monthly PMI.
8. Maximum loan amount = $417,000.
9. No cash reserves required.
10. Full Documentation Only.

As you can see, this program is not a cure all for your 100% financing blues, but this may be just what the doctor ordered for some of your borrowers who do qualify.


Posted by Joseph P. Mazzei at www.mymortgagebroker.blogspot.com