100% Financing with USDA Direct Home Loan. Worth Checking?

Buying a home with USDA direct loan in Snohomish county

(Are you looking for a Snohomish county USDA-eligible area map?)

As it became more difficult to qualify for a conventional home loan lately (even though interest rates rock!), it makes sense to explore other options. I’d like to talk about the so called USDA Direct Loan today. I’ve worked with a few homeowners who got one and are quite happy.

Rural development loans have been around for a while. I’m not an expert on those loans, so for details you should contact the USDA office directly. However, I wanted to pinpoint a few things that may not be readily available on the rural development website.

USDA Section 502 Direct loans are funded by the US government and are available to low- income households (whose income is below 80% percent of the medium income in a particular area). The USDA website offers a tool that can be used to check eligibility. If you don’t qualify for Direct loan you may still be eligible for the Guaranteed loan, so it’s worth checking.

Let me start with some limitations of the program first.

Eligible Area. It’s a rural development loan, so you’re limited to where you can buy a home. In Snohomish County, homes located east of Highway 9 are eligible. However, north of 140th Street in Marysville the border goes further west to the Interstate 5. This may be confusing, so check the USDA eligibility map.

Modest Housing. Well, if the program is designated to help low- income home buyers, you would expect the modest housing requirement. For example, the house with a pool is not allowed (How many of those are around here, anyway?).

Availability of Funds. There’s a chance that by the time you apply and find a home, the local USDA will run out of money. Once in a while it happens. All files are put on hold until the funds arrive. I don’t know the exact procedure but this “hold” may last anywhere from a couple of days to a couple of months. For this reason, it may be challenging, though not impossible to buy a bank owned home with  USDA loan.

Now, let’s mention some advantages.

Zero Downpayment. It’s quite tough to get a 100 percent financing on conventional loan. The benefit of this USDA loan is that you can buy a home with 0 down and not be required to pay any mortgage insurance.

Subsidy. Based on your income you may qualify for a payment subsidy. You submit your income and other info to the USDA office and if you qualify they may reduce your home payment to around 30 percent of your monthly income. USDA will cover the difference! One caveat, though. This is added to your principal, and if you sell your home you may be asked to repay the subsidy you received.

Payment Deferral. With a conventional loan, if you lose your job and can’t make the payments, you’re really in trouble. However, if you have a USDA direct loan, it’s fairly easy to apply for a payment deferral. If it’s approved, you don’t have to make payments for up to a year. The payments are ultimately added to your principal but you don’t risk being foreclosed on. This gives you more time to land that job.

Latest Lake Stevens WA Real Estate Update:

(Lake Stevens homes located east of Highway-9 qualify geographically for USDA loans)

Showing properties 1 - 2 of 208. See more city of Lake Stevens real estate.
(all data current as of 2/4/2012)

1. $137,900 : 1019 87th Ave SE, Lake Stevens
   
   3 beds, 1 full, 1 part baths

   Home size: 1,040 sq ft

   Lot size: 5,663 sq ft

   Year built: 2003

   Parking spots: 2

   Days on market: 77
   
2. $49,900 : 1819 Sunnyside Blvd, Lake Stevens
   
   2 beds, 1 full bath

   Home size: 672 sq ft

   Lot size: 34,848 sq ft

   Year built: 1931

   Days on market: 34
   

Listing information deemed reliable but not guaranteed. Read full disclaimer.