The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: wtjbatman on June 23, 2015, 07:30:57 AM
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I'll give the backstory first, and the questions at the end. The wife and I moved down to southwest Missouri about a month ago, to a small town just outside of Springfield. Things are going really well for both of our careers. At the same time, we've been looking around, and houses here are dirt cheap. And not manufactured homes. Honest to god gorgeous 3 and 4 bedroom houses with all sorts of unnecessary but shiny additions. The equivalent to the $220k+ house we were looking at in Minnesota is $160k or less here in Missouri (!!). In the meantime we are living in an apartment, and it didn't take long for us to realize that we are too old for apartment living. Just not our scene anymore. We want to purchase a house and get started on a family. One thing I discovered was this USDA rural home loan program. With it you can purchase a home in a rural area (which around here is almost everywhere except the city of Springfield itself) with a very small down or no down payment. At the same time since the loan is guaranteed by the U.S. government, you don't pay PMI, just a small USDA loan processing fee. Based on our current household income, we would just fall into the moderate income category, which makes us eligible for a "guaranteed" loan. There is a sense of urgency here however, as it's looking more and more likely that I will get a big promotion in the next 6 months, which would raise my salary by 50% and put us well out of the income range and disqualify us for this type of home loan. In that case, we'd be back to the normal save 20% for down payment type of home buying situation. Which we would like to avoid, as we don't want to live in an apartment for another three years.
Does anyone have experience with USDA Rural Home Loans? Are they "hard" to get? Do realtors like working with people who get that type of loan? Any dangers/pitfalls I'm not thinking of? I understand the idea that the more money we borrow (because of a much smaller down payment) the bigger our mortgage will be, I'm looking for other things that are less obvious that I may have missed. Any feedback is appreciated.