There is good news for homebuyers looking to find their dream home in St. Cloud. Based on data provided in the most recent U.S. Census, the United States Department of Agriculture was planning to eliminate St. Cloud from the eligibility area for the USDA home loan program. The impending change caused a considerable amount of anxiety for homebuyers in St. Cloud and created a race against the clock as their October loan submission deadline approached. In fact, Buyers that weren’t able to complete their loan application process in time to have it submitted to the USDA by their lender, ended up having to either cancel their home purchase altogether or change their loan at the last minute - meaning they now needed to find an additional 3.5 percent of their purchase price for their down payment.
The good news came when the USDA announced the delayed change to the eligibility maps - essentially creating an opportunity for some homebuyers to once again begin their home search in St. Cloud.
As a homebuyer, determining if the USDA loan is right for you is important, but the USDA loan is not the only loan out there. By arming yourself with important knowledge on the types of home loans available, you will be preparing yourself for the start of your home buying journey.
- USDA Loan. The mission of the USDA Rural Development’s Single Family Housing Guaranteed Loan Program is to assist low to moderate income rural homebuyers achieve their dream of homeownership. But, don’t worry, the term rural is used loosely. The biggest difference between this loan and a few of the others is that you are not required to make a down payment with a USDA loan - very enticing for many homebuyers, including first-time homebuyers. However, homebuyers are still required to qualify for this loan which includes a debt-to-income ratio not exceeding 41 percent and a credit score of 640 or higher.
- Conventional Loan. A conventional loan has a variety of options. Depending on their income, borrowers can often choose between 15-year and 30-year loan terms and fixed-rate and adjustable-rate mortgages. Most conventional loans require a minimum of a 5 percent down, and unless the Buyer is making at least a 20 percent down payment they will be required to pay PMI (Private Mortgage Insurance) in their monthly mortgage payment.
- FHA Loan. Similar to a conventional loan, the FHA loan requires a down payment, but it is only 3.5 percent of the purchase price. With this loan, although buyers can have total monthly debt (including their mortgage payment) that adds up to 41 percent of their monthly gross income, their monthly mortgage payment cannot exceed 29 percent of their household income. It is important to note your mortgage payment is based on the total principal, interest, taxes and insurance (PITI) due on your new home each month. Do you have a generous relative? You can also use money that is gifted to you towards the down payment, closing costs and other fees with this type of loan.
- VA Loan. This loan is available to our well-deserving veterans and other active duty military personnel. A Certificate of Eligibility (COE) is required and enables those eligible to obtain a VA-backed loan with no money down. An attractive option for veterans, these loans are offered as 15- or 30-year loans and rather than paying PMI, there is a small funding fee that usually averages about 2 percent of the total loan amount. Like all loans there are still qualification requirements - this one is similar to the FHA loan where to qualify you must have no more than 41 percent as your debt-to-income ratio.
Working with a REALTOR® that has certain designations, like one that has earned the Military Relocation Professional (MRP) certification provides peace of mind for veterans and other military personnel knowing they have a professional on their side that understands their needs, timetables and can make the transfer easier, faster and less stressful.
Knowing the loan options available and having an idea of which loan fits your needs is a great first step in the home buying process.
