West Bloomfield, United States – September 2nd, 2014 /PressCable/ —
In Michigan, one of the best mortgage programs for first time home buyers is the USDA Rural Development (RD) Loan. The reason this loan program stands out from the rest is that it offers true 100% financing. Saving for a down payment can be a real barrier for first time buyers and that's why this program is so great.
Buying a home can be very expensive when adding up the closing costs and the down payment. These costs are typically paid by the borrower. Depending on the loan amount, the sum of these costs can be thousands of dollars.
Since the USDA RD Loan does not require a down payment, the only costs to the buyer will be the mortgage closing costs and home inspections. However, these costs can be covered in two different ways, or a combination of them both.
The first way to cover the buyer's closing costs is to request that the seller pays them in the form of a sales concession. This needs to be requested when the buyer makes an offer to purchase the property. USDA allows up to 6% in sales concessions which in most cases will cover most, if not all, of the closing costs.
The second way a buyer can cover closing costs is to finance them into the new mortgage. However, this can only be accomplished if the home appraises for more than the agreed upon purchase price. The RD Loan can go to a maximum 102% loan to value based off of the appraised value.
So, if a home is purchased for $95,000 and it appraised for $100,000, the buyer could potentially finance $5,000 in closing costs. This is just a rough example of how this works and should not be considered typical.
“The USDA RD loan allows a first time buyer to purchase a home without spending a significant amount of their own money. It's important to realize that working with a knowledgeable broker will help ensure the transaction is written properly to cover all of the costs” says Jason Nolan, senior loan officer and president of Michigan Mortgage Solutions.
Another great feature of the RD Loan is that it has the lowest monthly mortgage insurance premiums when compared to other high “loan to value” mortgage programs. This can be a real benefit for a first time buyer because it will help to keep the monthly mortgage payment as low as possible.
The USDA monthly mortgage insurance premium is calculated at 0.4% of the loan amount. This mortgage insurance will be paid for the entire term of the mortgage. For example, on a $100,000 loan the monthly mortgage insurance would be $33.33 per month.
When compared to an FHA mortgage insurance premium which is calculated at 1.35% of the loan amount, it provides a pretty significant savings. The FHA monthly mortgage insurance would be approximately $112.50 per month on the same $100,000 loan. That's more than three times the cost of a comparable USDA RD loan!
Property Eligibility for 100% Financing in Michigan
One restriction to the USDA Rural Development Loan is that it is location dependent. The program was created to help low to medium income households purchase homes in rural areas. Fortunately, in Michigan, the vast majority of the state is eligible for the USDA Rural Development Loan.
The main areas that are not eligible for RD financing are typically bigger cities with larger populations. This means that buyers won't have to go way out in the country to find a home that is eligible but will have to find something outside some city limits. In Michigan the main areas that are not eligible are Wayne and Oakland Counties although certain “pockets” in those counties are eligible.
“Being able to buy a home without a down payment didn't seem possible prior to learning about the RD Loan. It's almost like a dream to get such a low payment and spend so little out of pocket!” says Melissa Blare, a first time home buyer in Michigan.
Another thing to keep in mind when considering the RD loan is that there are household income limits. These limits vary by county and are based on the number of residents in the household. However, they are very reasonable and rarely affect those trying to get approved.
Overall, the USDA Rural Development Loan will help the Michigan first time home buyer buy a home with very little money out of pocket while keeping the monthly payment incredibly low. If the buyer and property qualify, it would be hard to find a better home loan than the USDA RD loan.
Name: Trevor Sines
Organization: Michigan Mortgage Solutions
Phone: 248 674-6450
Address: 91 N Saginaw St #206, Pontiac, MI 48342
Release ID: 61538