Life has its challenges. And if you're a young adult just getting started out on your own, you already know that making smart financial decisions about your future can be one of the biggest challenges of all.
Where do you even begin? You're already paying down your school loans, financing a new "used" car and writing the monthly rent check. Then there's groceries, utilities and weekends out with your friends. How will you ever begin to think about buying your first home? Doesn't that require a 20 percent down payment? Yeeks!
We've got good news! There's a home loan designed for first-time homebuyers that offers 100 percent financing. It's called the USDA Rural Development Mortgage (RD) program and it can help you buy a home in a rural or suburban area with zero-down payment, minimal investment and low interest rates. This loan is insured by the U.S. Department of Agriculture to promote homeownership in less-dense communities and is often a good option if you're buying your first home or having trouble saving for a down payment.
Eligibility is determined by home location, income level and other requirements. Once you apply for a loan for a property that qualifies under the program (don't be alarmed, a huge portion of the country qualifies), your lender will look at your monthly debt total, excluding your rent. If the payments are 41 percent of your income or lower and your credit is good, chances are you can qualify this loan. Once you qualify, you may buy, build, rehabilitate, improve or relocate a dwelling in an eligible rural area.
The USDA works with private sector lenders like Amerifirst to generate these loans. The RD program offers considerable flexibility when it comes to the other costs with a mortgage, like closing costs, and allows the seller to pay all of the expenses. You can find the areas that this program covers by reaching out to us or by using the USDA's website.
A program like this can help you overcome the biggest barrier to owning a home - the down payment. The savings can be the difference between getting your own home and continuing to write the rent check. Let's take a look at the down payment for a typical conventional loan.
Conventional loan, 3 percent down payment*
Home price: $150,000
3% down payment: $4,500
With a USDA RD loan, you won't need to come up with $4,500 for a down payment. If you have a small savings account, you can use it to buy a couch and easy chair for your new living room instead!
Wondering what other home loan options are available? Download our ebook, Find the Right Mortgage for You.
*30-year fixed rate, 5% interest rate