For those buying homes in rural areas, USDA rural development loans are a wonderful way to buy. However, there are changes coming to the program October 1, 2012. This is a zero down program for those that meet the income and property address guidelines. This is one of two zero down programs still left - the other is a VA mortgage.
Rural development mortgages are 30 years only, you can't do a 15 or 20 year term. You can only use it for your primary residence. You do not need to be a first time homebuyer. You can use a gift to help with the closing costs or the seller can contribute towards your closing costs. Most lender require a 640 minimum credit score.
Currently there is a guarantee fee of 2% that is added to the mortgage, that will continue the same. There is also a monthly fee of .30% (similar to mortgage insurance), that fee is increasing to .40% for all conditional commitments issued on or after October 1, 2012.
In Minnesota, you need to be outside of the Minneapolis/St. Paul metro area. In October there will be a few more cities that will no longer qualify for the program. Currently if you are buying in the city limits of Northfield, Faribault and Owatonna you can use the program, however that will change October 1st. Other cities that will be affected by the changes on October 1st are Waconia, Big Lake, Buffalo and North Branch.
