December 16th, 2011 11:14 AM by Bob Rutledge
Many home buyers dream of purchasing a home but don't necessarily have the cash on hand to make the hefty 20% down payment required by a conventional home loan. USDA Rural Development mortgages stand alone as the only zero money down program available to borrowers that have not served in the military. Eligible borrowers will be hard pressed to find a loan program that offers more favorable terms. In the State of Missouri a USDA Rural Development mortgage is the way to go if you are interested in an economical and obtainable home loan.
In the past many have referred to the USDA Rural Development mortgage as "the farmers loan" or the poor sibling to the FHA mortgage, this just isn't true any longer. There are still restrictions to this loan program that makes it unavailable to some borrowers but for those who can qualify for the USDA mortgage it is still the best available mortgage.
Geographical Restrictions to USDA Rural Development Home Loans
The number one restriction is geographical, there is a reason it is called rural development. This loan program is only applicable to designated rural areas, the large metro areas of St. Louis and Kansas City are ineligible but the sounding counties of Jefferson and St. Charles have areas that are still eligible as well as Lincoln County, Crawford County, Warren County and Pike County.
Some of the smaller metro areas like Columbia, Springfield and Cape Girardeau are ineligible within the city limits but as soon as you leave the city limits you may be eligible if you live in Greene County, Boone County or Cape Girardeau County. USDA Rural Development provides a great tool to check if a property is within the eligible areas, CLICK HERE and see if the house you want is available for 100% financing.
Income Restriction to USDA Rural Development in Missouri
The Rural Development mortgage program was developed to help low to moderate income families so there are income restrictions on this loan program. Income is limited to 80% of the median income for the county your new home is in plus the size of your family that will be residing in your new home. The bigger the family the higher the income limitations. Don't be concerned about the income limitations I have found that most people never make too much money. CLICK HERE and be taken to the State of Missouri guide to income limitation for USDA Rural Development loans.
Why USDA Rural Development Mortgage Program
The main advantage of the USDA Rural Development home loan is that it provides the opportunity to purchase your next new home with zero down payment! Other than the VA mortgage no other loan program allows for nothing down.
N mortgage insurance, nearly every loan program requires mortgage insurance if you are not putting 20% or more down on your new home and mortgage insurance can be very expensive with FHA it basically adds another 1.15% to your interest rate. With Rural Development you now have to pay a yearly fee equal to 0.3 percent of the loan balance, but this fee is a lot less than the alternative.
Great interest rates! Considering that you are financing 100% of the sales price the interest rates for USDA Rural Development mortgages in Missouri are very low. Generally, you will find that a 30 year fixed rate mortgage to be at or below a similar FHA loan and nearly always lower than a comparable VA or conventional mortgage.
No Out of Pocket Expense
Here is an advantage of the USDA Rural Development mortgage that most of my home buyers are finding that many lenders cannot or will not do. There are always closing costs involved with any mortgage, these are costs that are not considered part of your down payment and they can add on to quite a lot of out of pocket expense. What would you prefer, to keep your money in your pocket or give it to someone else?
There are 3 methods to having little to zero out of pocket expense when it comes to utilizing this great loan program. 1) simply ask the sellers to pay for the closing costs, negotiate this when you make your offer and the may be able to get the sellers to pay your closing costs. 2) if the appraised value of your new home is higher than the sales price you can possibly roll all the closing costs into the new loan. 3) HAVE YOUR LENDER PAY FOR ALL THE CLOSING COSTS! This isn't something many lenders can or will do but I help many new home buyers by providing a lender credit for ALL THE CLOSING COSTS.
Before You Shop For a New Home
Before you start shopping for a new home please get pre-approved by the lender of your choice, this simple process can cure all sorts of headaches that could come up after you are tied in to a sales contract. Of course, I would welcome the opportunity to provide you with a no cost and no obligation pre-approval, if you are looking to purchase your next new home in the State of Missouri I can help you.
I have closed USDA Rural Development mortgages in nearly every county of Missouri, including Jefferson County, Lincoln County, Warren County, Montgomery County, Crawford County, Perry County, Washington County, Stoddard County, Gasconade County, Pike County, Cape Girardeau County, Greene County, Jasper County, The Springfield area, Boone County and all around Columbia, just about everywhere in Missouri. Let me add your county to my list.