It seems like we are getting constant updates on program changes again! FHA has changes in underwriting guidelines coming in September, Fannie Mae has some underwriting changes coming in September, now USDA is making some changes to their fee structure on October 1, 2015.
USDA has a great program for those that qualify allowing you to purchase a home in rural areas with zero down. Your income has to be at 115% of the adjusted area median income and you have to be purchasing in an area approved by USDA. The USDA website has maps of the state and breaks down what areas are eligible. For the Minneapolis/St. Paul area, you need to be outside the metro area, but towns like Elko New Market, Belle Plaine, Zimmerman and Isanti qualify.
Currently USDA charges a 2% guarantee fee that is added to your mortgage, so a $200,000 home will have a $204,000 mortgage on it. That guarantee fee is going to increase to 2.75% on October 1st. That will increase the mortgage from $204,000 to $205,500. There is also a monthly fee of .50% that is added to your monthly payment. That monthly fee is there for the life of the loan. The monthly fee is not changing in October, just the initial fee.
USDA also allows you to ask the seller to pay closing costs, so it can be a great way to get into a home with very little out of your pocket. That makes this a great loan for those that are buying in rural areas and do not have a lot of cash. It is a 30 year fixed rate loan, the payment will not change other than any changes to your property taxes and homeowners insurance.
If you are currently looking for a home in areas that will qualify for this loan, you may want to try and close prior to October 1st. It will save you some money! Remember that all USDA loans have to be underwritten by both our underwriters and also by USDA, so you need to allow for extra time before closing!
Talk to your loan officer and see if this program might be an option for you. It's a great way to get into a home with little money of your own!