Dean's Blog

Great news! 100% financing is back for rural areas. Congress approved the restoration of Rural Housing funding, subject to the President’s signature. We notified you in June that some of our lenders were closing Rural Housing loans in anticipation of the funding being restored, and now all lenders who are closing these loans should be joining the crowd.

The biggest advantages to this program are:

• 100% financing of the home purchase
• NO monthly mortgage insurance
• Competitive interest rates

This is a great program that provides up to 100% financing for the purchase of a home in rural areas. In this case, a rural area is where the population is less than 20,000 people. In Northwest Washington, all areas north of Marysville are eligible except for Mount Vernon and Bellingham. So, areas like Burlington, Sedro-Woolley, Anacortes and Oak Harbor are eligible! You can check your area for eligibility online.

There are income limits that cannot be exceeded, but they are pretty generous. For a family up to four people, here is a sampling of the maximum income allowed for 2010:

• Skagit County: $74,050
• Whatcom County: $74,050
• Island County: $89,500
• Snohomish County: $92,600
• San Juan County: $78,050

The income limits are even higher for families with five to eight people. You can check income limits for your area online.

The one major change for this program is the funding fee, which is used to self-insure the program. By self-insuring, there is no need for a monthly mortgage insurance payment from the home owner. That makes this program less expensive on a monthly basis in most cases when compared to FHA or conventional loans. The only other program that works this way is VA.

Additionally, instead of relying on Congress to re-authorize funds for this program each year, the funding fee has been increased from 2.0% to 3.5%. This funding fee can be financed into the loan, so when the seller pays for the buyer’s closing costs and pre-paid items, the buyer can achieve a no-money down loan.

Remember, not all lenders will originate Rural Housing loans. Either they don’t do any government loans, or they have elected not to have this product in their mix. So, make sure you’re speaking with a local, professional mortgage advisor who has access to all the available products. Our firm has several lenders offering this product, so feel free to contact me with any questions you have about 100% financing in rural areas.