Word on the street is that the mortgage crisis has eliminated 100% mortgages for home buyers.

100% Mortgages are Still Available:

I’ve been selling real estate since 2002 and just learned about a loan program guaranteed by the USDA that allows buyers to borrow 100% of the purchase price of a home. I’m guessing that a lot of other agents and home buyers are not aware of this program either.

The USDA mortgage loans are designed to promote home ownership for moderate to low income people in rural areas. Since the federal government guarantees that the bank won’t lose money if a borrower defaults, it allows banks to take more risk and lend 100% to buyers that might have trouble qualifying for a mortgage otherwise.

Who is eligible for a 100% USDA loan?

Loan applicants must:

  • Have adequate and dependable income to repay the loan
  • Be US citizens or permanent residents
  • Meet maximum income levels (vary by location)
  • Meet credit history requirements which indicate that the loan will be repaid
  • Qualify with the Department of Rural Development based on housing needs and debt levels

What are the loan terms?

  • Loans can be up to 100% of the appraised value of the home OR an appraisal that is based on future improvements
  • There is NO MAXIMUM loan amount
  • The loan guarantee fee and closing costs can be rolled into the loan
  • All loans are 30 year fixed rate loans
  • No mortgage insurance premiums
  • The home seller can pay the buyer’s closing costs
  • Gifts/grants from relatives or community organizations are allowed to assist with buyer’s costs

What type of home can you buy?

Homes must be located in eligible rural counties and in good condition unless some of the funds will be used to improve the home.

In the St. Louis region, eligible areas include:

  • Franklin County
  • Warren County
  • Lincoln County
  • Small portions of Jefferson County (primarily near the Cedar Hill area)
  • Small portions of St. Charles County (primarily near the Portage de Sioux area)

Check to see if an address qualifies for one of these loans by using the USDA Rural Development property eligibility finder.

Not every lender handles USDA mortgages. If you are interested in getting more information for a home purchase in the Missouri counties near St. Louis, contact Aaron Hall at the United Bank of Union. Aaron is processing the loan for my home listing in Pacific. All looks good at this point and we are due to close in a few weeks.

For everyone else, visit the USDA Rural Development site for a list of contacts for your area.

This program isn’t going to be right for everyone. But, if you are having trouble qualifying for a loan or saving up for a down payment, you might just consider moving out to the country so that you can buy a home.