Archive for the “USDA Zero Down Loans” Category

All Things Zero Down for the USDA (Rural Housing) home loan program guaranteed by the Fed Gov’t.

Just like FHA Streamlines, Streamlines on USDA loans are fast and easy refinances designed to drop the interest rate and payment. The full guidelines are found here : document AN 4549 at

here are the essentials about USDA streamline refinances :

1) the mortgage being refinanced must already be an existing USDA guaranteed loan.

2) The only manner in which the refinance is ‘Streamlined’ is the absence of an Appraisal. An appraisal is not needed. However in every other way, the loan process resembles a standard USDA purchase mortgage loan.

3) The maximum allowable loan amount is limited to the principal balance of the current loan plus the one-time guarantee fee of 1.0% which is funded on top of the loan..

5) Although an appraisal is not required, the borrower has to get a property inspection certifying the property meets minimum standards as defined by HUD regulations 4150.2 and 4905.1.

6) if there’s an existing 2nd mortgage on the property, it cannot be included in the new USDA loan. The lender on the 2nd must make their lien inferior, in other words, subordinate.

7) the homeowner cannot get ‘cash out’ of the refinance.

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There are some sweeping changes coming in the Fall of this year (2011) which will make Mortgage lenders more accountable for the loans they fund and approve; some speculate that this is the part of the reason the USDA has chosen to tack on Mortgage Insurance (just like FHA’s) to the monthly payment.
Thankfully, we the tax payers won’t be the ones needing to subsidize things. The homebuyer pays Mortgage insurance just like he/she would for an FHA loan.
Here’s how things will change , come Oct 1, 2011.
Presently the USDA Zero down loan carries with it a 3.5% Upfront Guarantee fee and no monthly mortgage insurance.
After Oct 1, the Upfront Guarantee fee drops to 2.00% and an annual Mortgage insurance of 0.3% will be added.
The annual mortgage insurance will never go away over the life of the loan. (This makes it unlike FHA, where after 5 yrs and 78% Loan-To-Value threshold, the mortgage insurance can go away).
Good news is that the annual mortgage insurance $dollar amount will decline each year because it’s recalculated at the new principal balance of the loan each year.
Overall this means an increase of about $16/mo for every $100,000 loan amount borrowed. Not a deal killer necessarily, but definitely something that affects debt ratio and qualifying ability/buying power.
Stay tuned for more updates :)
Be sure to use our super Mortgage Calculator (unlike any other) to compare payments at

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Yes! True, according to the USDA rulebook, Borrowers can be ‘able’ to get FHA (or VA) financing, but if they have 20% down for an UNINSURED Conventional loan, they’ve apparently got no business applying for USDA :) . Here’s the exact verbiage from the USDA rulebook. (Remember these types of loans were brought in to assist ‘moderate income’ families who didn’t have sufficient cash for a downpayment.

The borrower must not have sufficient assets to obtain other traditional conventional financing. The borrower may, however,
qualify for an FHA or VA loan. In other words, applicants may have liquid assets and be eligible to participate in the GRH Program. Those assets, however, should not be sufficient to meet the down payment and closing cost requirements associated with a conventional uninsured mortgage product (LTV  80%). This means applicants do have a choice of USDA-Guaranteed Rural Housing, FHA, VA, or a conventional mortgage product with private mortgage insuranc

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Deducted from what? From gross adjusted Income, for the purposes of keeping you (the Borrower) below the Income limit for the program.
Remember, USDA Zero down loans have income limits which are determined by the entire income of the household.
Common deductions we immediately look for are for childcare expenses, minors living at home, full time students living at home, elderly folks 62+ yrs or older, disabled etc etc.
But medical expenses in excess of 3% of annual income maybe deducted. For a detailed breakdown, read this lengthy article.
USDA Loans & Medical Expense Deductions

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Today I had to confirm with my USDA Underwriter that a Veteran based out in Kansas could purchase an *OWNER OCCUPIED* home here in California using the USDA Zero Down loan. And as I indicated, the answer was yes. USDA doesn’t disallow Veterans stationed in other States from purchasing where their family is.
Of course I had to furnish my Underwriter with adequate documents as to the Veteran homebuyer’s home town/residency etc.

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