There are many benefits of a Rural Development Loan. Here are those benefits broken down to what a borrower REALLY wants to know about getting a Rural Development Loan. Please click on any of the links below for more information on the benefits most important to you: :
With a Rural Development Loan, you can finance your home up to 100% of the appraised value of the home – which is not necessarily the same as your purchase price. If your home appraises for more than what your purchase agreement says, you can actually use the difference in value to help pay for some or all of your out of pocket expenses associated with getting a mortgage. An example of this would be if your purchase agreement says that you will buy a home for $100,000 and the appraised value of the home is $102,000, you would then be able to roll up to $2,000 of your loan closing costs into your new Rural Development mortgage loan.
A Rural Development Loan is one of the only programs still available today that does not require a down payment. (VA loans are another type of zero down program, but you must meet VA loan requirements).
With a Rural Development Loan, there are no reserves required. You will only need to have the funds in your account to cover any costs you are not able to roll into your new RD Loan or that are paid by seller concessions.
A Rural Development Loan offers a lower private mortgage insurance payment (PMI) than traditional mortgages. Having a lower insurance payment monthly allows for a larger principal & interest payment – which means you may be able to qualify for a larger mortgage because of the lower insurance payment you are required to pay monthly. Rural Development Loans do have a 2% funding fee, but this fee is rolled directly into the RD loan.
There are many loans available today to help first time home buyers. With Rural Development Loans you don’t have to be one. RD loans are available to everyone. Even if you have purchased a home in the past, you can still take advantage of the benefits of a Rural Development Loan. (Some restrictions apply on owning more than 1 home)
Rural Development Loans allow for the seller on a home to offer a buyer help with their mortgage costs. This is called Seller concessions. Seller concessions is an offer by the seller to help the home purchaser cover any closing costs, prepaid costs, tax pro-ration or other allowable expenses. With an RD loan, these concessions are not limited to 6% like other programs, but concessions greater than 6% may require additional information.
Rural Development loans allow for gifted funds. If a buyer is required to bring in any money to close on the RD loan, the funds can be gifted to them. Specific documentation is required with gifted funds.