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The Zero Money Down Mortgage Loan that Can Land You Some Land

Family in yardLife 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. 


Loan Options Guide


  *30-year fixed rate, 5% interest rate


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Tips for Paying Off Your Mortgage Faster

There are several ways to pay off your mortgage faster and save on interest payments. Even better, not all methods require spending a lot of extra money! Take a look at the list below: Make extra principal payments.  You can pay extra money toward your mortgage balance each month or make a larger, lump sum payment on your principal each year. This reduces the amount due on the mortgage as well as reducing the amount of interest that will accrue. Extra money can also be added to the principal payment from bonuses, gifts, savings and extra earnings. Just remember to make a note on the check for the money to go towards the principal! Make one extra mortgage payment per year. One of the easiest ways to make an extra payment each year is to pay half your mortgage payment every other week instead of paying the full amount once a month, otherwise known as “bi-weekly payments.” With these payments, an extra payment is made so that the total number of payments that one makes adds up to 13 payments in a year rather than the 12 that would have been made with monthly payments. This adds up to significant interest savings over the duration of a mortgage. You also want to make sure that if your lender accepts this kind of payment they will not charge you a prepayment penalty. Also verify that the bi-weekly payments are being applied to the principal amount and not the interest. Otherwise, you won't notice the savings. Reduce your balance with a lump-sum payment. Have you inherited money, earned a bonus or commission, or sold a large item? You could apply that amount to your mortgage’s principal balance. Another option is any time you have a month where you have that third paycheck, apply that to the principal on your mortgage. This will happen twice a year, adding an extra principal payment to your mortgage loan. While paying down a large debt is nice, it's not a requirement. Consider making sure you have enough to work toward other financial goals, such as an emergency fund, before paying more on your mortgage. However, there are many options you can explore that best fit your budget. You can learn more about buying your first home with our Get Mortgage Ready Guide below.


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