Buying a House with No Money Due at Closing is Possible with a USDA Mortgage

by Keith Landis on May 9, 2011

Buying a House with No Money Due at Closing is Possible with a 100% USDA mortgage.

A few weeks ago I had a customer purchase a property using a 100% USDA Mortgage.   At the closing, they actually got cash back for the $2000 Hand Money they deposited to secure the sales contract and the $375 they paid for the property appraisal.  These buyers had nothing due at closing, so they actually received a check for $2375 at the closing table.  They ended up purchasing a home with no money due at closing and a monthly mortgage payment that was less than their current rent payment.

This is just an example of the tremendous buying power of a 100% USDA Mortgage.  When negotiating a sales contract to purchase a USDA eligible property, you can stipulate for the seller to cover the closing costs.  This combined with the fact that USDA allows for no down payment from the buyer can create a situation where there are no funds due at closing.  USDA guidelines also allow a buyer to receive back at closing any money they have already paid towards the transaction.  This allows for the home buyer to receive back prepaid items such as the Earnest Money, also called Hand Money, and any funds they paid towards a property appraisal.

As always USDA Mortgages provide these key benefits :

  • True 100% no money down financing.
  • The ability to finance in your closing costs (if the appraised value supports the loan amt)
  • The seller may contribute up to 6% of the purchase price towards your closing costs
  • No Mortgage Insurance
  • Low interest rates.
  • More flexible qualifying guidelines with minimum 620 credit score

 

USDA Mortgages are only allowed for properties located in USDA eligible areas.  The USDA eligibilty map can be found here…

http://eligibility.sc.egov.usda.gov/eligibility/eligibilityAction.do

USDA mortgages do have income restrictions so click here to check on those…

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=pageLoad&requestInfo=GuaranteedIncomeLimits&NavKey=incomelimit@1

The combination of no down payment and seller paid closing costs often enable home buyers using a 100% USDA Mortgage to have no money due at the closing table.  With the low USDA mortgage rates and no money due, many buyers are able to own a home for less than the cost of renting.

If buying a home in Pennsylvania, make sure to check out a USDA Mortgage.

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