USDA Has $11.2 Billion to Guarantee No-Down Mortgages

Written by: Steve Cook   Fri, August 12, 2011 Beyond Today’s News, Crisis Programs

The US Department of Agriculture has only two months to spend $11.2 billion on its no-down payment rural development loan program, a record amount at this juncture in the federal fiscal year for the program that provides no down payment mortgages to borrowers in rural and suburban markets.

Usually by August, the program, which has become extraordinarily popular since the demise of private no-down financing, runs out or money and applications are put hold until more money becomes available with the beginning of a new federal fiscal year October 1.

This year, however, the program is enjoying a windfall, the result of a continuing resolution signed by President Obama April 15 that doubled the size of the USDA’s Rural Development Service’s Section 502 single family guaranteed loan program from $12 to $24 billion.  Some $12 billion has been allocated over the past three months.

Founded in 1949 to spur home sales and development in rural areas, the US Department of Agriculture’s popular direct and guaranteed rural housing loans today are one of the few places in America you can still get a mortgage with no money down at competitive rates.

Borrowers don’t have to be lower income; in fact they can make slightly more than the median.  To qualify for the government guaranteed loans, borrowers can earn up to 115 percent of the median income for the area.  Nor do they have to buy in rural area.  They can live relatively close to a major urban area or in a popular resort community, however qualifying areas were recently redrawn to comply with the program’s rural mandate.

Best of all, no down payment is needed to get financing through approved lenders, which makes the USDA program more attractive to borrowers who qualify that FHA.

Effective October 1 the USDA will begin collecting a monthly mortgage insurance of .3 percent, but their up front mortgage insurance will be reduced from 3.5 percent to 2 percent. On a $200,000 purchase with a USDA guaranteed mortgage at 5 percent, a buyer’s current mortgage payment will increase $34/month under this new split premium mortgage insurance structure, which could potentially make it more difficult for some buyers to get financing.

2 Comments For This Post

  1. Patti Hannah Says:

    It is utterly amazing how USDA and Obama is blowing smoke up the taxpayers rear ends. Especially the members of Congress. USDA has a plan to fix the Guaranteed Program and chastise the lenders involved for shady lending practices and their failures. That is almost a script out of a comic section. But yet on the flip side of the coin, USDA loans through the Direct loan buying process through Government is the worst lending system and program for housing in America. It is a process that wastes Tax dollars by millions because of USDA failures of doing the same exact or not worse, than that of those very same lenders they chastise…what is USDA’s excuse? Better yet, what makes them exempt from scrutiny and their failures in the lending business? I live for the day that Congress DEFUNDS the USDA RURAL DEVELOPMENT HOUSING PROGRAM.

  2. Patti Hannah Says:

    To the Public. DO NOT fall to temptation of this loan offered by Government. They will proceed to do everything in their power and man they have it down to a science to lock you into one of these loans. Don’t fall for it. After you sign on the dotted line…the nightmare will begin. Congress has granted them “absolute power” over the people and you at every turn will suffer the consequences of the failing inefficient and ineffective Government program that does nothing to improve the quality of your life.

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