COLUMBUS — Zero down payment home loans, once a popular option for financing a new home no longer exist in the open market in the aftermath of the continuing financial downturn.
Obtaining a zero down payment loan is still possible, however, for those who meet the criteria of the United States Department of Agriculture (USDA) Rural Development loan programs.
USDA Rural Development Guaranteed and Direct home ownership loans are available to help low and moderate income households purchase or construct a rural home.
Properties eligible for the USDA loans generally must be located in rural communities with a population of 20,000 or less.
Charles Scheibe, Area Specialist with the USDA Rural Development in Norfolk said that despite the population criteria, Columbus and Norfolk are currently eligible for the loans because staff at the Norfolk office were able to show the need for the loans.
“In Columbus the guaranteed program has helped an average of 30 to 40 households a year for the past 10 years,” Scheibe said, adding that “2008 was much better with approximately 50 loans in Columbus.”
Scheibe said the number of direct loans are lower because most people who meet home ownership eligibility requirements, qualify for the guarantee loan program.
Individuals or families must meet established income guidelines, have an acceptable credit history, and show the ability to repay the proposed loan.
Those applying for a guaranteed housing loan must have an income below the established moderate income guideline. For example, in most counties in Nebraska, a four-person household could have income up to $70,750, or greater in some counties.
The income guidelines related to these programs can be found on the USDA’s Web site at http://eligibility.sc.egov.usda.gov/eligibility through links on the left column of the page.
The department’s guaranteed loan program is obtained through participating lenders. In Columbus those lenders include Bank First, Charter West National Bank, Columbus Bank & Trust Co., Columbus United Federal Credit Union, First National Bank, First Nebraska Bank, Pinnacle Bank, and TierOne Bank.
“The applicant still goes through the conventional lender for the USDA’s Guaranteed Loan program,” said Scheibe of Norfolk USDA Rural Development office. “The interest rates vary every day and will depend on when the applicant locks in that loan. There may be other fees as well depending on the institution, but the USDA is the guarantor of the loan.”
Calls to local banks on the list showed that current rates are in the 5 to 5.5 percent range based on the applicant's credit score and other variables.
A USDA Guaranteed loan is a fixed rate, 30-year loan. The fixed rate provides for stable payments over the life of the loan. In addition borrowers won’t pay a monthly fee for private mortgage insurance with the USDA Guaranteed Loan program because the loan is backed by the government.
A separate program, the USDA Direct Loan Program offers a 33-year term at a fixed interest rate, which is currently at 4 percent. This rate may be reduced through interest rate subsidy available to qualified applicants.
Households applying for a direct housing loan must have an income within the very low and low income established guidelines. For example, the low income limit for a four-person household in most counties in Nebraska is $41,450. The eligible income cap may be more in some counties.
Through the Direct Loan Program, a loan is made directly through the USDA Rural Development office.
The program is limited to applicants who are unable to obtain conventional financing and who do not qualify for the USDA Guaranteed program.
Households interested in the Direct Loan Program should contact Diane Bryant or Terri Olander at (402) 371-5350, Ext. 4 at the Norfolk Rural Development office.
Another USDA Rural Development home loan program, the Low Interest Home Repair Loan, makes possible 1 percent interest loans available to very low income rural homeowners for home repairs. Loans of up to $20,000 for a 20-year term can be obtained through this program. Loans of less than $7,500 obtained through this program, in some cases, may not require a mortgage against the property.
Eligible repairs can include furnace, roof, windows, siding, insulation, storm doors, and electrical, plumbing and sanitary disposal systems.
Making a home accessible for disabled household members or modernization of a home may also be possible under the program.
A $10,000 loan at 1 percent interest for 20 years would have a monthly payment of $46, compared to a conventional loan with an interest rate of 7 percent for 10 years, with a monthly payment of $116.
A spokesman for the Rural Development office in Norfolk said adequate loan funds are available under the home repair program and area households are encouraged to apply.
For more information or to obtain an application, contact Jeff Carpenter or Terri Olander at (402) 371-5350, Ext. 4.