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The Last Frontier of No Money Down

Posted by:  Chip Poli
2011-12-26 12:18:24

We always associate the term “USDA” with the Government Agency that protects us against food born illnesses and low quality steak but, you may not have been aware this agency can also help you buy a home with NO MONEY DOWN.

The USDA offers a mortgage guarantee program to eligible buyers in eligible areas of the United States that could help you realize the American Dream.

The USDA Home Loan Program

The USDA (United States Department of Agriculture) rural housing loan focuses on moderate income families in many less populated areas of the United States.

USDA has become increasingly popular recently due to tighter lending guidelines associated with conventional FNMA or FHLMC mortgage loans. In this article, we will discuss the main features and benefits of the USDA rural housing mortgage program.

USDA rural housing mortgage programs gives you flexible underwriting guidelines with relatively liberal credit requirements and no Monthly PMI (private mortgage insurance).

Low 30 year fixed interest rates as compared to the conventional loans and the capacity to finance closing costs into the mortgage amount are a few of the reasons that make this Government Guarantee program so popular.

Some USDA highlights:

First and Foremost 100% financing, USDA is one of the last remaining No Money Down programs offered anywhere to first time home buyers.

The program does require a 2% (of principal balance) deposit to the USDA Insurance Fund. This money is used to insure the lender against loss. The important thing to note about this fee is that the guidelines do allow for financing of the amount.

No Monthly PMI (private mortgage insurance). Monthly payments for Mortgage Insurance can be costly and the USDA program does not requireany monthly deposits to the Insurance Fund.

A very secure 30 year fixed rate mortgage is another key component of the program. Your interest rate will be fixed and your loan can be fully amortized if you decide to keep the loan indefinitely.

Sellers can credit the buyer with a predetermined amount to cover potential closing costs. This should be negotiated as part of the Purchase and Sales Agreement.

Flexible underwriting standards. It is impossible to discuss the entire underwriting manual here but feel free to contact a Poli Mortgage Professional if you have questions.


USDA Eligibility Criteria:

Unlike Federal Housing Administration (FHA) mortgages, USDA does have an income limitation. The adjusted annual household income of the borrowing family should not exceed the moderate income limits for the region. Other factors such as child care considerations and family size may boost chances for eligibility.

You can search the Income Eligibility requirements HERE.

The USDA offers very handy tools for determining property eligibility by region. You can use this link to access the interactive map the USDA maintains.

Here is a map of Southern New England. The areas in the Tan are “INELIGIBLE” as you can see most of Southern New England is eligible for USDA Financing:

USDA Lending Area Massachusetts-Connecticut-Rhode Island


If you are seeking a 100% financing option in an eligible area of Maine, New Hampshire, Vermont, Massachusetts, New Hampshire, Connecticut, Rhode Island, Kentucky, North Carolina, Virginia, Georgia, Alabama or Florida please do not hesitate to contact Poli Mortgage and one of our knowledgeable Mortgage Professionals would be happy to guide you through the process.

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