A NO DOWN PAYMENT REAL ESTATE LOAN USDA 502 Revision

As a new home buyer, it’s a confusing process to research what types of loans are available and will work for you. I am a veteran living in Carson City Nevada after being told that on my current income I would qualify for about $187,000 using my VA loan, which is $70,000 less than the amount needed to purchase a home. Fortunately, I stumbled across a government-funded loan that I qualified for $287,000. This loan does not include a down payment or mortgage insurance, and depending on income, may offer a monthly payment subsidy. The loan made it possible to buy a house in rural Nevada. In general, the income limit is $55,000 for a family of four.

The USDA RD 502 Direct Loan is a federally funded loan and the process is difficult at first. To help you understand, I recommend contacting your state office for help with the application process. When you call for help, ask for the Single Housing representative.

The loan promotes rural areas generally with a population of less than 35,000, to help determine property eligibility and determine eligibility loan amount.

According to USDA RD, in general, to qualify you will need to demonstrate your ability to repay the loan and have a qualifying income based on the area in which you would like to live and,

  • Not being able to obtain a loan from other sources on terms and conditions that can reasonably be expected to be met

  • Agree to occupy the property as your primary residence

  • Have the legal capacity to contract a loan obligation

  • Meet citizenship or eligible non-citizen requirements

  • Not be suspended or excluded from participation in federal programs.

(Taylors, 2019)

The main features of the Direct 502 loan are the absence of a down payment in most circumstances and the absence of mortgage insurance. Another great feature is that the federal government will help you make your monthly payment, allowing you to qualify for a higher loan amount. However, the subsidy does have a repayment feature, if you sell your home or no longer use it as your primary residence.

One last note: The loan process can take up to 120 days from start to finish, please contact the USDA RD office in your area for more up-to-date details.

Means

Taylor, J. (2019, December 15). Direct Loans for Single Family Homes. Retrieved from usda.gov/programs-services/single family housing direct home connections/nv.

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