If you've never heard of the USDA loan program, you're not alone. It's a niche product serving a fraction of the U.S. housing market, and most banks don't offer them. However, eligible suburban and rural home buyers can use it for 100%, no-money down mortgage financing.
The program's full name is the USDA Rural Development Guaranteed Housing Loan program. Most people call them "USDA loans", "Rural Housing Loans" or "Section 502 loans".
USDA loans are insured by the U.S. Department of Agriculture and the program's biggest feature is its option for "no money down" financing. Via the USDA, you can finance 100% of a home's purchase price while getting access to better-than-average mortgage rates. Beyond that, USDA loans are similar to other common loan types. The repayment schedule is "normal", closing costs are standard, and there are never prepayment penalties to pay. Where USDA loans are different, though, is with respect to its down-payment requirements and its simpler loan approval standards.
Rural loans can be used by first-time buyers and repeat home buyers alike. Homeowner counseling is not required to use the USDA program.
USDA/Rural Development Fact Sheet
Colorado Housing and Finance Authority (CHFA) announced this week that it is now offering its down payment assistance for home buyers in the form of a non-repayable grant. The program will provide qualified borrowers with down payment and closing-cost assistance for up to 5 percent of the purchase price of a home. With Colorado home prices having increased by six percent in 2014 according to the Colorado Association of REALTORS®, CHFA's new grant is expected to provide greater access to homeownership to those who have avoided or been unable to enter the home purchase market in Colorado. All qualifying home mortgage borrowers who make loan reservations on or after February 2, 2015, can receive the grant, which can total up to three percent of the loan amount.
CHFA's new grant is available to either first-time or non-first-time home buyers under most of its 30-year, fixed rate, first mortgage loan programs. Borrowers who meet income requirements, have a mid-credit score of 620 or higher, contribute $1,000 toward the transaction, and complete a CHFA home buyer education class (online or in-person) prior to loan closing may be eligible.
CHFA has been offering down payment assistance in various forms since 1991, and this is the first time in more than 10 years CHFA has offered a grant as part of its loan programs for home buyers. The CHFA grant program may be used toward the down payment, closing costs and/or other fees.
We also sponsor free home buyer education across the state in English and Spanish to help prepare you for homeownership.
CHFA Loan Program Web Site
Typically an FHA loan is one of the easiest types of mortgage loans to qualify for because it requires a low down payment and you can have less-than-perfect credit. An FHA down payment of 3.5 percent is required. Borrowers who cannot afford a traditional down payment of 20 percent or can't get approved for private mortgage insurance should look into whether an FHA loan is the best option for their personal scenario. Another advantage of an FHA loan is that it can be assumable, which means if you want to sell your home, the buyer can "assume" the loan you have. People who have low or bad credit, have undergone a bankruptcy or have been foreclosed upon may be able to still qualify for an FHA loan.
FHA loans have been helping people become homeowners since 1934. How do we do it? The Federal Housing Administration (FHA) - which is part of HUD - insures the loan, so your lender can offer you a better deal.
What does FHA have for you?
- Low down payments
- Low closing costs
- Easy credit qualifying
-Buying your first home?
FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price. Available on 1-4 unit properties.
-Financial help for seniors:
Are you 62 or older? Do you live in your home? Do you own it outright or have a low loan balance? If you can answer "yes" to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash.
-Want to make your home more energy efficient?
You can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.
-How about manufactured housing and mobile homes?
Yes, FHA has financing for mobile homes and factory-built housing. We have two loan products - one for those who own the land that the home is on and another for mobile homes that are - or will be - located in mobile home parks.
FHA Loan Program Web Site
VA loans are home loans for the purchase of a primary residence available to consumers who have served or are presently serving in the U.S. military. While the Department of Veterans Affairs (VA) does not lend money for VA loans, it backs loans made by private lenders (banks, savings and loans, or mortgage companies) to veterans who qualify.
Who Is Eligible for a VA Loan?
- Active-duty personnel
- Reservists/National Guard members
- Some surviving spouses
What Are the Benefits of a VA Loan?
There are many, as taken directly from the Veterans Affairs site:
- No down payment required (unless required by the lender or the purchase price is more than the reasonable value of the property).
- Buyer informed of reasonable value.
- Negotiable interest rate.
- Ability to finance the VA funding fee (plus reduced funding fees with a down payment of at least 5 percent and exemption for veterans receiving VA compensation).
- Closing costs are comparable with other financing types (and may be lower).
- No mortgage insurance premiums.
- An assumable mortgage.
- Right to prepay without penalty.
- For homes inspected by VA during construction, a warranty from builder and assistance from VA to obtain cooperation of builder.
- VA assistance to veteran borrowers in default due to temporary financial difficulty.
Loan Program Web Site
A "conventional mortgage" simply refers to any mortgage loan that is not insured or guaranteed by the federal government.
Conventional mortgage loans can be both fixed mortgages or adjustable-rate mortgages, including hybrid ARMs.
Additionally, these types of loans may be conforming or non-conforming, with the former meeting the standards set forth by government-sponsored enterprises Fannie Mae and Freddie Mac.
Be careful not to confuse conventional with conforming, as the two terms are very different. However, neither are considered government loans, despite the fact that Fannie and Freddie are now in government control.
One major factor that determines whether a mortgage is conforming or not is the loan amount – loans over the conforming loan limit are considered jumbo mortgages and will come with a higher mortgage rate as a result. Still, both types of loans are considered conventional.
Additionally, conforming loans have a minimum credit score requirement of 620 and tend to have a max loan-to-value ratio (LTV) of 97%, whereas non-conforming conventional loans may allow lower credit scores and higher LTVs.
Fannie Mae’s Homepath is a conforming loan program that allows LTVs of up to 97%.
These days, conventional mortgages (whether conforming or not) typically have higher down payment and credit score requirements than government loans, and if the LTV exceeds 80 percent on a conventional loan, private mortgage insurance is required by the mortgage lender.