USDA loans are still zero down 30 yr mortgages however, they will be slightly more expensive after September 30th.
USDA loans are for rural areas and in the Minneapolis St Paul area, they are as close as Elko New Market, Northfield, Zimmerman and Big Lake. They allow for zero down and the seller can contribute towards closing costs.
At this time, there is not a monthly mortgage insurance premium however there is a 3.5% guarantee fee that is added to the mortgage. Because there isn't a monthly fee, it helps lower your monthly payment compared to FHA with a 1.15% mortgage insurance premium.
Going forward after September 30th, USDA is going to lower the guarantee fee to 2% but they are going to add a new annual fee of 0.3% of the balance of the loan. USDA is doing this to make the program self supporting. The payment will be smaller than most mortgage insurance payments but may affect the borrower's ability to qualify for as much home as they had in the past.
If you are buying a home for $150,000 with a USDA loan, your monthly fee will only be about $37.50 per month. It's not much especially compared with FHA, where the monthly payment would be $143. But at the same time, USDA really wants to see your housing debt ratio to be about 35% at the most. The extra monthly fee may mean you won't qualify for as much as you would have in the past.
For those looking at using USDA loans on a home now, if you have a conditional commitment from USDA prior to September 30th, you will not have the monthly fee. If you do not get the commitment until after that, you will need to pay it.
It is still a great loan for those buying in rural areas – the only other true zero down loan is a VA loan! If you have questions on a USDA mortgage, please let me know.
Leslie Vanderwerf, NMLS ID#335509, Advisors Mortgage - Email – Website
