Kelly L. Zitlow

Rural Housing Implements Monthly Mortgage Insurance

USDA Home Loans have been a great tool to obtain a mortgage in Arizona for many cash strapped buyers offering 100% financing with NO monthly Mortgage Insurance. As of October 1^st, however, USDA Rural is requiring a 0.3% annual mortgage insurance fee for both purchase and refinance mortgage transactions.  The fee is based on the average annual scheduled unpaid principal balance for the life of the USDA Home loan.  The fee will be calculated when the loan is originated and every 12 months thereafter until the USDA Home loan is paid in full.  The annual fee will be collected on a monthly basis with the borrower's mortgage payment.

While the monthly payment will be a bit higher for those using the USDA home loan there is some GOOD NEWS! On October 1^st USDA lowered the upfront financed Guarantee Fee from 3.50% to 2% on purchase transactions. The guarantee fee is similar to a FHA Loan's up front mortgage insurance premium which is financed into the loan.   See below for further highlights and a few Arizona Contract writing tips for USDA home loan buyers.

USDA Home Loans require a 2.0% guarantee fee which is financed in to the loan, the loan amount exceeds the purchase price. Example:

• Purchase Price: $ 100,000
• Down Payment: $ 0
• Base Loan Amount: $ 100,000
• Guarantee Fee (2.0): $ 2,000
• Total Loan Amount: $ 102,000 (Amount reflected on LSU & Pre-Qual Form)

Seller can contribute up to 6% toward closing costs and pre-paid items. Request this on lines 77 & 78 of the Arizona Purchase Contract ~ can be listed as a % or $ amount.

• Highlights of the USDA Home Loan program include:
• Not limited to first time homebuyers
• 640 minimum credit score
• 30 year fixed rate
• No pre-payment penalty
• 2 months liquid reserves (checking, savings, stocks)
• Must be the buyers primary residence
• Income limits apply
• Property must be in an eligible area as defined by USDA
• Zero down payment home loan

Eligible Areas:

USDA updated their boundaries earlier this year. The following website allows you to view a map and determine specific property eligibility. The map is very user friendly and will allow you to zoom in on exact street locations. Click here ~ Eligibility Map ~. As a whole, most of Maricopa County is NOT eligible for USDA Home Loan financing with the exception of Buckeye and certain parts of Anthem/Desert Hills. Most of Pinal County is eligible. If you have a buyer interested in obtaining a USDA Home Loan I encourage you to visit the Eligibility Map on the USDA website to be sure the property is in the eligible boundaries.

Feel free to call me with Arizona mortgage questions including those you have about the USDA Home Loan program. It's a great zero down payment program for those who meet the USDA Home Loan requirements.

Enjoy our beautiful Arizona FALL weather this weekend!

~ Kelly

Quote of the Week: Win without boasting. Lose without excuses. ~ Vince Lombardi

First Posted 10/7/2011