Durham: Real Estate

Q: Are 100 percent mortgage loans still available through the Rural Development Program?

A: The federal government, through a program with the U.S. Department of Agriculture (USDA), has 100 percent financing available for homes. When most people think of the USDA, I would imagine they don’t think the USDA can assist them getting into their next home. But, they can. The USDA has a Rural Housing Development Program that is charged with providing 100 percent mortgages in rural areas of the country. Under the terms of the program, an individual or family may borrow up to 100 percent of the appraised value of the home, which eliminates the need for a down payment.

Sometimes good credit and a steady income are not enough to qualify for a home loan at a commercial lending institution, such as a bank or mortgage company. More families and individuals may be eligible to become homeowners with the help of the USDA guaranteed loan. When the federal government agrees to guarantee a loan, lending institutions can help buyers while incurring less risk. Through USDA’s Rural Housing Development Program, low and moderate income people can qualify for mortgages even without a down payment.

In the Chattanooga area, over 80 percent of the area of the Georgia counties of Catoosa, Walker and Dade are eligible for the 100 percent mortgage program as rural areas. In Hamilton County, the eligible rural areas includes Soddy-Daisy, Lakesite, Sale Creek, Birchwood, Collegedale, Apison and other outlying areas north and east of Chattanooga. Not all of the USDA eligible rural areas would be considered to be exactly “rural” by most of us.

Location is just one of the few requirements that exist to take advantage of this incredible opportunity. Combined household income is another requirement. But, many buyers fall under the income guidelines. In the Chattanooga area, the household income limit for a one to four person household is $73,600 and for a five to eight person household is $97,150. Families must be able to afford the mortgage payments and must have reasonable credit histories. Loans are for a 30-year term.

Loans may be up to 100 percent and up to 102 percent if the program’s two percent guarantee fee is included in the loan. Mortgages are for 30 years and a fixed rate at market. Loans may include funds for closing costs and prepaid items if the appraised value is higher than the sales price. Sellers may contribute to buyer’s closing costs. And the buyer must personally occupy the dwelling following the purchase.

Homes financed under the program must be modest in size, design and cost. Guaranteed loans can be made on either new or existing homes. Existing homes must be structurally sound, functionally adequate and in good repair. There are no restrictions on the size or design of the home financed. The home must not be used for income producing purposes. Also, there are building and site standards required. Manufactured homes can qualify with additional requirements. USDA will require an inspection of the property to determine if it meets the program’s requirement.

Buyers interested in learning more and locating potential eligible homes should contact a Realtor.

Get answers to questions you might have about real estate from Randy Durham, who is president of the Chattanooga Association of Realtors and a broker with Keller Williams Realty. His column appears on Sundays. Send your questions to Business Editor John Vass Jr. at jvass@timesfreepress.com