100%
FINANCING . . .
WITH
A GUARANTEED RURAL HOUSING LOAN!
100% financing was very popular
during the sub-prime loan boom. While there can be a number of reasons why a borrower
might prefer 100% financing when purchasing a home this form of financing was
mostly used to help borrowers with little or no cash to purchase a home.
Another reason for 1005 financing
might be to avoid liquidating other assets, like stocks or a 401k account, to
acquire a down payment. Perhaps a borrower wants to leverage his/her purchase
in order to maximize their tax deduction advantage? In some cases, a borrower
may want to purchase a home prior to selling their present home, resulting in a
temporary shortage of cash with which to purchase. On the other hand, there are
those borrowers who look to 100% financing simply because they have no
financial assets. Too often, these same individuals possess less than perfect
credit.
It is unlikely that we will see a
return of the conventional 100% loan option. But, there is only one 100% loan
program available today, all the others having been eliminated following the
financial crash of 2008. The USDA Guaranteed Rural Housing (GRH) Program is an
excellent loan option for those who meet the qualifications.
As a government sponsored product,
the GRH loan has some strict rules accompanied by some flexibility in its
borrower qualifying guidelines.
Deemed a “rural” program, homes anywhere within Humboldt County
are eligible for financing except the City of Eureka (designated he County’s urban
area).
There are also maximum income limits, based upon family size, that inhibit
some possible borrowers. Like most loan programs, a 640 minimum credit score is
now mandatory. Other than the location, credit score and income limit
requirements, the program is quite flexible. The USDA Rural Development's Guaranteed Rural
Housing Program is designed to meet the needs of home buyers who have the
necessary income and credit history to qualify for a conventional mortgage, but
not the down payment.
100% Financing…No money
down….No PMI…No cash reserves
Maximum
loan amount can exceed 100% of the APPRAISED value
Highlights
* Borrowers do not
have to be first time homebuyers; however, borrowers cannot currently own property
* Competitive
pricing (comparable to Fannie Mae rates)
* If appraisal
value exceeds purchase price, closing costs and possible improvements may be
included
* 2/1 Buy-down
available; buyer qualifies at bought down rate
* No prepayment
penalty, no recapture fee
* No limit on purchase price (see below for income limitation)
* NEW manufactured homes are eligible; cannot have been occupied
* Condominiums are eligible as long as an association is in place
* 640 Minimum Credit
Score
* No mortgage
insurance requirement – funding fee of 3.5% can be added to loan amount
* No cash reserves required
* Non-taxable income (social security, child support, etc.) can be grossed up
to 1.25%
Limitations
* 6% Limitation of Seller Contributions
* Property can be
anywhere in Humboldt, Del
Norte & Trinity Counties except Eureka
* Must be an owner-occupied
* Site value cannot exceed 50% of total appraised value
* Impound account for Taxes and Insurance is required
* Income limitation – Maximum Annual Income for Family of 4 = $74,050
* Pest inspection and work required only IF appraiser calls
for inspection – FHA appraiser required
* Streets &
roads servicing the property must be paved or have all-weather surfacing
* Fully
documented, 30 year fixed rate mortgage only
* Debts with more
than 6 payments remaining must be included in ratios
100% financing can be enticing but
if you proceed with this kind of financing, be certain that you understand all
aspects of the loan you will be acquiring.
Discuss it fully with your loan officer and ask questions until you are
satisfied that this kind of loan will meet your specific finance need.
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