According to a recent press release by the US Department of Agriculture’s Rural Development division, they have just two months to spend 11.2 BILLION dollars on it’s no-money down loan programs. This means that this year, unlike some years in the past, they will not be running out of money by the end of the fiscal year and slowing down the purchases of the USDA 100% mortgage loans here in Indiana.

Founded in 1949 to spur growth of home sales and development in rural areas, the USDA RD loan is one of the few remaining programs that offer 100% financing, and the only one that allows the borrower to finance the closing costs, if the appraisal allows by showing the value greater than the purchase price. For many of my borrowers in Indiana, this is an opportunity to get into a home for very little to no money out of pocket.

One caveat however, is that starting October 1st, 2011, the loans will require a 0.3% monthly mortgage insurance premium and will decrease the up-front premium from 3.5% to 2%. Previously there was no monthly premium. This change will cause the monthly payment on a $200,000 loan at 5% interest to increase by about $34 a month.  While not a large increase, it can add up over the course of a 30 year loan, and may disqualify a few potential buyers if they are very close on their debt-to-income ratios.

If you are interested in purchasing with a USDA loan, contact me now so that we can make sure all your finances and credit scores are in order! I can be reached at 219-695-0369.

Scott

Your Indiana mortgage expert specializing in FHA, VA, and USDA Rural Development loans.

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