Programs for 100% financing are so rare that lenders are dusting off forgotten old products to find ways to serve the market.
I learned yesterday that a lender we do business with at Compass Home Loans has reintroduced the 100% Guaranteed Rural Housing loan program, with updated features that make it easier to work with.
This is a USDA-guaranteed loan product for financing homes in rural areas (so, no City of Charlottesville properties, period). For purchasers who qualify, it offers to finance 100% of the appraised value of the property, which means that you may be able to finance your closing costs. There is no monthly PMI — instead, the 2% loan guarantee fee can be added to the loan amount — and this program allows the seller can to pay up to 6% toward closing costs.
To get this loan, the buyers have to have enough income to qualify, but not so much that they exceed the maximum allowed. Income limits are tiered to family size. Fortunately, there is a helpful USDA public-access website where you can input your property address and your income to see if you are within the requirements. Make sure you click on links for the “Guaranteed” loan program.
The USDA Guaranteed Rural Housing product is offered widely, but there is a difference among lenders in how long it can take to get a loan closed. Some lenders must still send loans directly to USDA for underwriting approval, which can take several weeks, but other lenders offer delegated underwriting, for a much shorted processing time. (At Compass Home Loans, our lender has delegated underwriting and can do pre-approvals; without this practical workability, the product is far less attractive.)
If you think this program might work for you, check out the website and call for a pre-approval. You’ll want your Realtor to understand the product and work with your loan officer as you negotiate your purchase offer. One tricky point: you won’t know if you can finance your closing costs until the appraisal is completed, which may be a week or so after your purchase contract is signed. So it might be a good idea to ask the seller to pay your closing costs when you first negotiate your contract.
