There are three government-backed mortgage programs available to South Carolina home buyer today. Those three are the USDA, FHA and VA loan programs. USDA and VA are the only two that still permit 100% financing. The VA loan does not require a down payment yet is only available for veterans of the Armed Forces and Reserves and most active duty personnel. The other, the USDA mortgage, has no restrictions regarding military service and also does not require a down payment. Is the USDA Rural Housing Program right for you?
The United States Department of Agriculture backs the USDA program and for those wanting to buy and finance a home with as little cash to close as possible, the USDA loan might very well be your best choice. In addition to not having a down payment, interest rates on USDA loans are extremely competitive when compared to conventional loan programs with a 5% down payment. The USDA mortgage comes with fixed rates only, no adjustable rate option available. However, with the low-interest rates of today, a fixed rate is likely the better choice for most home buyers.
In order to take advantage of the USDA loan, the subject property must be located in an area approved by the USDA. As the name might imply, the program is designed to help consumers buy and finance homes in rural and semi-rural areas. Yet the approved locations in South Carolina can be surprising to many as a particular zip code might be anything but rural. In fact, nearly 97% of the United States is in an eligible zone which will stay the same throughout 2018. These changes are made based upon changing demographics and population shifts.
The program also limits the household income in order to qualify for the program as well. There is a calculation that approved USDA lenders use but in general, the household income for all adults living in the property cannot exceed 115% of the median household income for the area.
The USDA government-guarantee is financed with both an upfront, one-time mortgage insurance premium of 1% of the loan amount and is rolled into the mortgage. The annual fee is 0.35% of the loan balance and is paid in monthly installments. Both premiums are extremely competitive compared with other government-backed programs. Learn more about USDA closing costs here. While many lenders can approve a USDA loan application, fewer lenders even offer the program which is unfortunate. For lenders and banks that do appreciate the USDA mortgage, they know that the loan is guaranteed and should the loan ever go into default, the lender is compensated for the loss. Conventional loans have no such guarantee and lenders take full responsibility for the approved mortgage.
The USDA mortgage is not limited to first-time homebuyers and can be used by any qualified buyers when the property is located in an approved area. Contact us today at the number above to learn more about all the USDA Rural Housing eligibility requirements.