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Updated:         June 4, 2018

100% financing was very popular during the sub-prime loan boom. While there can be a number of reasons why a borrower might prefer 100% financing when purchasing a home this form of financing was mostly used to help borrowers with little or no cash to purchase a home.

Another reason for 100% financing might be to avoid liquidating other assets, like stocks or a 401k account, to acquire a down payment. Perhaps a borrower wants to leverage his/her purchase in order to maximize their tax deduction advantage? In some cases, a borrower may want to purchase a home prior to selling their present home, resulting in a temporary shortage of cash with which to purchase. On the other hand, there are those borrowers who look to 100% financing simply because they have no financial assets. Too often, these same individuals possess less than perfect credit.

It is unlikely that we will see a return of the conventional 100% loan option. But, there is one 100% loan program available today, all the others (except the VA loan for qualified veterans) having been eliminated following the financial crash of 2008. The USDA Guaranteed Rural Housing (GRH) Program is an excellent loan option for those who meet the qualifications.

As a government sponsored product, the GRH loan has some strict rules accompanied by some flexibility in its borrower qualifying guidelines.  Deemed a “rural” program, homes anywhere within Humboldt County are eligible for financing except the City of Eureka (designated the County’s urban area).

There are also maximum income limits, based upon family size, that inhibit some possible borrowers. Like most loan programs, a 640 minimum credit score is now mandatory. Other than the location, credit score and income limit requirements, the program is quite flexible. The USDA Rural Development's Guaranteed Rural Housing Program is designed to meet the needs of home buyers who have the necessary income and credit history to qualify for a conventional mortgage, but not the down payment.

         100% Financing…No money down….No PMI…No cash reserves

Maximum loan amount can exceed 100% of the PURCHASE PRICE depending upon the  APPRAISED value


* Borrowers do not have to be first time homebuyers;  however, borrowers cannot currently own property

* Competitive pricing (comparable to Fannie Mae rates)

* If appraisal value exceeds purchase price, closing costs and possible improvements may be included

* 2/1 Buy-down available; buyer qualifies at bought down rate

* No prepayment penalty, no recapture fee
* No limit on purchase price (see below for income limitation)
* NEW manufactured homes are eligible; cannot have been occupied
* Condominiums are eligible as long as an association is in place

* 640 Minimum Credit Score

* No mortgage insurance requirement – funding fee of 1.0% can be added to loan amount
* No cash reserves required
* Non-taxable income (social security, child support, etc.) can be grossed up to 1.25%




* 6% Limitation of Seller Contributions

* Property can be anywhere in Humboldt, Del Norte & Trinity Counties except Eureka
* Must be an owner-occupied
* Site value cannot exceed 50% of  total appraised value
* Impound account for Taxes and Insurance is required
* Income limitation – Maximum Annual Income for Family of 4 = $78,200

* Pest inspection and work required only IF appraiser calls for inspection – FHA appraiser required

* Streets & roads servicing the property must be paved or have all-weather surfacing

* Fully documented, 30 year fixed rate mortgage only

* Debts with more than 6 payments remaining must be included in ratios (large monthly payments may have to be considered in the ratios)

100% financing can be enticing but if you proceed with this kind of financing, be certain that you understand all aspects of the loan you will be acquiring.  Discuss it fully with your loan officer and ask questions until you are satisfied that this kind of loan will meet your specific finance need.


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