You’re ready to buy a home with a loan that allows for a small down payment. While there are many financing options, few offer 100% financing.
I’ll share 5 key benefits about the USDA loan program that could help you buy the home of your dreams with some affordable perks.
To get started, you'll want to discuss your mortgage options and qualifications with a licensed mortgage lender.
As a Maryland real estate agent with a background in mortgage financing, I believe it's important to understand all areas of the home buying process.
With that in mind, I'm sharing the benefits of a USDA home loan as found on USDA.Gov, guidance on buying Maryland real estate, and how you can better prepare yourself for homeownership.
A USDA Mortgage is a residential home loan available to borrowers buying homes in rural areas. USDA guaranteed mortgages are also known as "The Rural Development Guaranteed Housing Loan".
USDA describes this loan program as a program that “Assists approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas”.
If you're considering buying a home near Ocean City, MD as your primary home, you may be able to get USDA financing in Ocean Pines, MD. Search Ocean Pines, MD homes for sale here
Eligible borrowers may be eligible for a loan with 100% financing. This means you may be able to buy a home requiring no down payment.
For example: a FHA mortgage may require a down payment as low as 3.5% and a conventional mortgage may require a down payment as little as 3% to 5% for owner occupied homes.
If you buy a home for $150,000 and are required to put a 3.5% down payment to buy it, you’ll need to come up with $5,250 at settlement. You'll still have to pay closing costs such as transfer and recordation taxes, mortgage lending fees, title fees to name a few.
With a USDA mortgage, you may be able to save the $5,250 down payment.
A unique benefit of this mortgage program is if the appraised property value exceeds the sales price, the borrower has the opportunity to increase the loan amount to cover all or a portion of the closing costs.
Also, you may be able to get a seller to help pay some of your closing costs. In fact, you may be eligible to have the seller contribute up to 6% of the sale price to settlement costs. If we use the same $150,000 sale price, you may be able get the seller to contribute up to to $9,000. You'll want to ask your real estate agent about presenting a seller contribution as part of your offer.
When buying a home, you'll want to get a home inspection regardless of the type of loan you're getting. However, if you're getting a USDA mortgage, they'll take a closer look at the condition of the home you're buying.
Your home appraisal report will note if there are inspection concerns that need to be corrected before USDA will fund your loan. Your appraiser will need to know if your appraisal is for a USDA mortgage.
Learn more about the benefits of getting a home inspections when buying a home in my blog article, Why I Love Home Inspections (and You Should Too!)
If you're buying in Maryland with a USDA mortgage, you'll want to add the USDA financing addendum as part of your offer.
This financing addendum adds a few extra contingencies which could allow you cancel your offer if alternatives are unable to be worked out.
Appraisal contingency - if the property appraises for less than your offer price, you'll have the opportunity to present your appraisal to the seller's to give them the opportunity to lower the purchase price to the appraised value. If the seller doesn't agree to lower the purchase price you may be able to pay the difference or cancel your offer.
Lender required property repairs - if your lender is requiring repairs to the property before they fund your loan, you'll have an opportunity to present a list of repairs for the seller to fix, or other pre-negotiated terms.
USDA is accompanied by a fixed affordable interest rates. There can be many advantages to getting a more affordable interest rate. Your FICO credit score may determine how low your interest rate may be.
The better your credit score, the better chance you’ll have a lower interest rate. Your debt to income ratio will be a factor as well.
Although it is required, the Mortgage Insurance is calculated on an affordable Mortgage insurance scale. USDA assesses an upfront mortgage insurance premium as part of your settlement costs and an annual mortgage insurance premium, paid monthly.
USDA offers flexible credit underwriting requirements for low to moderate wage earners. Your credit score will determine if you’re eligible for any loan. USDA considers it’s financing based on financial situation for lower to moderate-income families. This can create beneficial opportunities for first time homebuyers.
Learn your options for buying real estate and homes for sale in Maryland when you contact Michael Nolen.
Whether you're interested in buying a condo in Ocean City, MD or a single family home in Salisbury, MD area, you'll learn your options.