How much payment assistance can I get with a USDA direct home loan?

There are several government-backed mortgage programs to help very-low and low-income Americans. FHA, for instance, offers a low-down payment option for those who qualify.

The Department of Agriculture Section 502 loans are the only federal programs, however, that offer loans to not only low-income Americans, but very low-income buyers as well.

In fact, “… the annual average income of a direct borrower is $27,500 and 80% of borrowers have annual incomes that do not exceed $35,000,” according to the National Rural Housing Coalition’s 502 Success Paper.

Highlights of the program include:

  • Borrowers do not need a down payment
  • The direct loan’s interest rates start at 1 percent
  • The program offers payment assistance, making the loan affordable to many who might otherwise not be able to afford a home.
  • Borrowers must attend homebuyer education classes and sign a document stating that the subsidy will be repaid.

The loan

Many homebuyers who research what the USDA offers don’t realize that two loans are offered as part of the Section 502 program. One is a guaranteed loan (much like the FHA loan) while the other is a direct loan from the government. The latter is what we’re covering today.

The direct loan is provided by the government, which acts as the loan’s servicer as well. This means the borrower makes all payments directly to the government. Because the government is the lender, it can be more flexible on income limits than conventional lenders.

Borrower eligibility

USDA’s Section 502 direct loan program is open only to American citizens and legal residents with very low incomes.

Unlike conventional lenders, the USDA does not have stringent credit score requirements, but will ensure that the borrower has a history of responsible use of credit and has the ability to repay the loan.

To learn if your income qualifies, visit USDA.gov and click on the abbreviation for your state.

Additional eligibility requirements include that the borrower must:

  • Not currently have “… decent, safe and sanitary housing,” according to the USDA.
  • Not be able to obtain a mortgage on conditions that you can meet from other resources.
  • Agree to live in the home permanently, until it is sold.
  • Be a U.S. citizen or eligible non-citizen.
  • Have the legal capacity to incur a loan obligation
  • Be in good standing from previous participation in any federal program

The home you choose to purchase must match the criteria

The home you choose must be modest in size, design, cost and amenities. The USDA considers homes with a square footage under 1,800 square feet modest and amenities must not include a swimming pool or any income-producing buildings.

Now, here is the tricky part: The property must be located in an “eligible area” the USDA defines as rural.

There’s an easy way to find out if a home you have your eye on will qualify. Go online to the program’s website, read the Property Eligibility Disclaimer and, if you agree with it, click on “Accept” on he right side of the page. Enter the property’s address in the search bar.

Subsidy Calculation

Mortgage payment subsidies are based on the applicant’s income, and determined at the time the loan is approved.

The USDA website offers consumers the Single-Family Housing Direct Self-Assessment tool. Here, you can enter your information to learn if the Section 502 Direct Loan is a good fit for you.

Big ideas for a small bathroom “remodel” on a dime

Large-bathroom envy. It’s common among homeowners in small homes with cramped bathrooms and most feel that they are stuck with what they have.

The truth is, there are plenty of remodeling/redecorating ideas to make a small bathroom feel and look larger than it is and they don’t require a single additional foot of space.

Follow these tips and start living large with a bathroom floor plan that might otherwise seem small.

Trick the eyes

High ceilings make rooms look larger and a few tricks can make yours soar.

Look up. See the spot where the walls meet the ceiling? Consider attaching some wood molding, tile or even a wallpaper boarder in those spots. Ensure that the product you choose is simple and thin.

“Wide, contrasting, and ornate molding will make a room with short ceilings appear smaller. Thin, color-matched, and simple molding will blend the walls into the ceiling in a smooth transition and make a room look bigger,” suggest the pros at homedecorbliss.com.

They also suggest that the molding be painted the same color as the ceiling.

Here’s another tip: Two mirrors placed opposite of one another will trick the eyes into seeing the bathroom as more palatial than it is. Or, you might want to consider placing a large mirror along one of the longest walls in the bathroom to add to the illusion.

“Decorating with mirrors is a must for making a small bathroom look bigger,” suggests Sophie Warren-Smith at homeandgardens.com.

Color

Soft color schemes are ideal for giving the illusion of more space in a small room. Cool colors reflect more light than warmer colors and should be used not only on the walls, but the trim and doors as well.

The editors at customtubandtile.net suggest sticking with designer-proven colors, such as:

  • White
  • Crème
  • Pastel blue
  • Gray

Then, lighten up the floor to make the bathroom appear more open and spacious. If you can’t afford to replace your flooring right now, consider using a light-colored rug to get the same effect.

Less is more in some cases

Go easy on the window treatments. In a small bathroom the general rule of thumb let in as much natural light as possible.

Consider ditching the window coverings altogether. “… natural light can make even the smallest bathroom appear larger,” suggests Paige Bennett at angi.com. “For added privacy without sacrificing light, install frosted glass windows,” she concludes.

If you have the budget, the installation of a solar tube or small skylight will allow even more light into the room.

Ditch the clutter

Even a little bit of clutter in a small space can make the room appear smaller.

Use your cupboard space wisely by storing all that clutter within in bins and baskets. Keep all countertops clear of anything that isn’t decorative.

Plumbing considerations

Oversized plumbing fixtures can make the room look cluttered and cramped as well. Consider ditching the bulky vanity for a pedestal sink. If you choose this option, however, you’ll lose the aforementioned storage option.

Swab out a rarely-used tub for a sleek, glass-enclosed shower.

A small bathroom doesn’t have to be cramped and dreary. You can make it cozy and intimate, with minimal effort and (very often) a minimal investment in time and cost.

Homebuyers: find out if a property is in a flood plain

A few weeks ago, monsoon rains flooded several Las Vegas casinos. Parts of the iconic Strip were turned into lagoons, according to the news. Then, there was the recent and devastating flood in Kentucky.

A state of emergency has been declared in two West Virginia counties after recent flooding. Missouri, Colorado and even Death Valley have experienced floods in recent weeks.

In fact, seven million people in several states are under flood watch as of this writing.

No, this isn’t anything new. Floods are “America’s most frequent and expensive disaster,” the experts at the non-profit Flood Defenders say.

They go on to quote a University of Maryland study that claims “America has experienced an urban flooding event once every 2-3 days for the past 25 years.”

Most important of all is that, according to the Federal government, 99% of U.S. Counties were impacted by a flooding event between 1996 and 2019.

Obviously, it’s important to find out if a home you have your eye on is located in a designated floodplain.

What is a floodplain?

A floodplain, according to the Federal Emergency Management Agency (FEMA), includes any area on land that is “… susceptible to being inundated by floodwaters from any source.”

That’s just one of the words that you may need to have defined during your search for information about flood insurance. Run up against another head-scratcher? Find the definition online at FEMA.gov.

Homeowners insurance doesn’t cover flood damage

Many new homeowners or about-to-be homeowners are shocked that their insurance on the home doesn’t cover any damage from flooding.

This can be a bit confusing because very often “water damage” is covered. Flood damage, however, is differentiated from water damage by the following definition:

Flood damage is caused by “a general and temporary condition of partial or complete inundation of two or more acres of normally dry land area or of two or more properties,” according to the experts at FEMA.

Kanner and Pintaluga, a property damage law firm, offers this distinction: “Water damage caused by flooding is not covered by homeowners or renters policies because it is considered a gradual event rather than sudden or accidental.”

“As a rule of thumb, if the water first touches the ground before entering your home, it is considered flood damage,” they conclude.

How can I protect my pocketbook from flood damage?

Even though homeowners insurance generally doesn’t cover flood damage, you are not without protection options: The National Flood Insurance Program (NFIP), managed by FEMA.

“You can purchase flood insurance through the National Flood Insurance Program or one of the more than 50 private insurance companies that offer the coverage,” according to the folks at FEMA.

If you own your home outright you may not even have flood insurance. Many Americans take the gamble and don’t purchase coverage.

It’s lower income homeowners who typically lack coverage, but can you blame them? “… the cost of federal flood insurance is rising as climate change increases damages to homes,” senior research scientist Alexander de Sherbinin tells Anuradha Varansai with Columbia Climate School.

He goes on to claim that rising flood insurance rates may put low-income homeowners at risk for losing their homes. “… insurance payments may go from $600 a year to up to $3,000 to $6,000 by 2022,” he said.

How to find out if that home you love is in a floodplain

Visit FEMA’s website to locate flood maps for the area. Enter the home’s address in the box and click on “Search” and you will be taken to a map of the neighborhood and details on flooding in the area.

Your best bet, however, is to call your homeowners insurance agent to find out if a home you are considering purchasing is in a flood zone.

Then, visit rocketmortgage.com to learn the risks of buying a home in a flood zone.

Questions? Although we aren’t insurance professionals, we are happy to point you in the right direction to get your questions answered.

The smart way to shop for a mortgage lender

There is a huge misconception among homebuyers that the best lender is the one who offers a product with the lowest interest rate. Here is why this may not be the case:

  • The rates advertised may not apply to the loan product you want.
  • The true Annual Percentage Rate (APR) may be higher – a lot higher.
  • Bait & Switch is still alive and well in the mortgage industry.

Although we aren’t finance experts, our best advice is to shop by comparing each company’s APR. This is because this figure reflects the annual percentage rate with points and fees included. We’ll get deeper into this in a moment.

The best place to start when shopping for a mortgage lender is where you do your banking. Find out what kind of rates and products they offer, and use this to compare against other lenders.

Contacting a mortgage broker may be a good next step. These mortgage professionals do the shopping for you, from a broad array of loan products with various lenders.

When you call or visit lenders, look into the following aspects of their loan products:

  • Request the lender’s current interest rates and ask if these rates are the lowest for just that day or for the week and if the rates quoted are for adjustable or fixed mortgages.
  • If you are interested in an adjustable-rate mortgage, ask when the rates will increase, how the rate and payments will vary and whether or not payments will decrease with a reduction in rates.
  • Ask the lender for the loan’s APR, which, as mentioned earlier, is a figure that represents the yearly rate and includes points, fees and other charges.
  • Request that the lender or mortgage broker express the points as a dollar amount. This will make it easier to determine exactly how much you’ll be paying for the quoted loan and easier to compare it to other offers.
  • Fees are sometimes lumped together under one category. Ask the broker or lender to separate them so that you can compare the fees associated with this loan to other loans. Ask for clarification for any fee you don’t understand

If you won’t be using an FHA, USDA or VA loan, find out how much the lender requires as a down payment. Also ask if Private Mortgage Insurance (PMI) is required and, if so, how much the premium will increase your monthly mortgage payment.

As of August, 2015, the Good Faith Estimate (GFE) form that the lender is required to supply to a borrower has been replaced with the Loan Estimate and Closing Disclosure. This form still itemizes the loan’s terms and fees but it goes into more detail and is easier for consumers to understand than the old standardized forms.

The Closing Disclosure must be given to the borrower three days before closing.

 The Mortgage Process

Here’s what to expect during the mortgage process:

  • Fill out and submit the loan application.
  • Your loan package goes to the processing department where all the information is verified.
  • Your package is sent to the underwriter, who decides whether or not to approve the loan. If the underwriter approves your loan, you will be mailed a “commitment letter.”

These are just the bare-bones steps in the process and no two applicants are the same; so your mortgage process may vary.

Homeowners insurance basics every first-time homebuyer should understand

Imagine losing everything you own – every single possession in your home and maybe even the house too. Ask anyone who has lived through a devastating fire what it feels like to suddenly have nothing but the clothes you’re wearing and you’ll understand the importance of buying homeowners insurance.

If you’re using a mortgage to purchase the home you’ll have no choice in the matter; the lender will insist that you insure the home.

In my daily dealings with first-time homebuyers, I’ve noticed that few of them understand insurance and how to intelligently shop for coverage. Hey, that’s understandable. It’s not every day you purchase a home. So, let’s bring you up to speed on purchasing enough insurance while trying to save money in the process.

Where to start

Your homeowners insurance covers the cost to rebuild the house, not the loss of market value. How much will it cost to rebuild the house? Your insurance agent will supply you with an estimate.

What insurance agent, you ask? Since you already have an established relationship with your auto insurer, he or she is a good person to contact first. Most insurers will offer a discount for those with more than one policy with their company.

But it’s always a good idea to shop around so ask friends, colleagues and neighbors who they recommend. An independent agent should be among those you interview. He or she is able to shop for coverage from among different companies to find you the best deal.

A good insurance agent will ask the important questions and gather lots of information from you. If you happen to interview an agent that magically pulls a figure out of thin air, without understanding your circumstances, move on to another.

To get a general idea of the replacement cost of your home before speaking with an insurance agent, follow the instructions at Forbes.com, Bankrate.com or Valuepenguin.com.

What does homeowners insurance cover?

The typical homeowner insurance policy covers damage to the home caused by fire, some natural disasters – wind and hail for instance – vandalism and theft. In some areas homeowners need to purchase additional earthquake or flood policies.

Your belongings, up to a set limit, are covered under your policy as well. “Homeowners insurance automatically provides coverage for your possessions based on a certain percentage of your home’s insurance value – 75 percent is typical,” Kiplinger’s Kimberly Lankford says.

“So, if your home is insured for $200,000, you’ll also have up to $150,000 of coverage for your possessions,” she continues. Lankford also cautions that the insurance company may set a coverage limit on some items, such as jewelry, so ask for additional coverage for any expensive pieces you own.

Your homeowners insurance policy covers more than just the home and its contents, though. It also may protect you:

  • For damage to other structures on your property such as the garage, a shed, fencing and an in-law unit.
  • From liability if someone is injured on your property.
  • From out-of-pocket expenses, such as housing and living expenses while your house is being repaired.
  • From liability for damage that you or a family member cause to other people or their property.

What’s not covered?

While it’s important to understand what your insurance policy covers, you also need to know what isn’t covered. These items are known as “exclusions” in your policy.

The following is a list of typical exclusions:

  • Water damage caused by flood or by sewer or drain backups.
  • Loss of pets.
  • Automobile damage or loss.
  • Damage as a result of war.
  • Power failure.
  • Earth settlement or other movement.

Choose a deductible

An insurance deductible is how much money you will pay out-of-pocket before the insurance company begins paying a claim.

The standard homeowners insurance policy deductibles are $500, $1000, $2500, and sometimes $5000, according to Coastal Insurance in Rocky Point, N.Y. The lower the deductible, the higher your insurance premium will be.

Choose the deductible carefully by considering what kind of a financial position you’ll be in should disaster strike. Do you have enough savings to pay the deductible? If you are retired, this is a crucial consideration.

Additional considerations

Ask your insurance agent about ways to get discounts on homeowner insurance. Adding a burglar alarm, sprinkler system and even smoke detectors may bring down the premium.

While the concept of homeowners insurance is simple, the policies may be confusing and complex. Choose an experienced insurance agent to help you navigate the process of buying home insurance.

Ensure that you get answers to every question that comes up.

You’ll need your homeowners insurance to begin coverage on the date you take possession of the house, so getting an early start on shopping for it is important.

How to get rid of fungus gnats in the home

According to the experts at Garden Media Group, the U.S. gained 18.3 million new gardeners during the pandemic.

Not all of these green-thumbers are playing in the dirt outside. In fact, houseplant popularity surged 18% while we were all snuggled down at home because of Covid, according to statistics published online at gardenpals.com.

One of the biggest challenges for the indoor gardener is the pest predicament. From “How did they get in my home?” to “How do I kill them,” garden groups on Facebook are full of tormented houseplant growers.

The most frustrating pest is the fungus gnat (Bradysia spp). A small winged pest, you’ll find them dead in droves near your potted plants, near the kitchen sink and flying into your face as you cross a room.

Lucky you, because we have a tried-and-true remedy to get rid of these nasty little bombardiers for good.

What you need to know about fungus gnats

“Fungus gnats are small flies that infest soil, potting mix, other container media, and other sources of organic decomposition,” according to scientists with the University of California Integrated Pest Management Program

They are especially fond of peat-based soil. The adult lays her eggs in the soil. When they hatch, the larvae gorge on any organic matter in the soil, “but also chew roots and can be a problem,” warns the experts at the U.S. Environmental Protection Agency (EPA).

Many gardeners rely on yellow sticky traps to trap as many adults as possible. These, however, do nothing to rid the house of fungus gnat larvae, which reside in the soil.

Forget those DIY recipes you’ll find online

There are lots of these recipes online. While people swear that theirs is the very best, most of them have been debunked via scientific research.

Universities have studied using a layer of sand on the top of the soil to discourage the gnats from laying eggs in the soil.

It didn’t work, although it’s one of the most popular suggestions from amateur gardeners. The research in fact found that when sand dries, it creates crevices, through which the female gnat can gain access to the soil.

Hydrogen peroxide, bottom watering the plant and a mixture of apple cider vinegar and several drops of liquid dish detergent in a bowl next to the plant are likewise pure myth.

So, how do you get rid of those creepy hordes of fungus gnats?

The one we’ve found works the best, without resorting to the use of toxic chemicals, is Mosquito Bits, a product usually used to kill mosquitos.

Mosquito Bits contain Bacillus thuringiensis israelensis (Bti), “… a biological or a naturally occurring bacterium found in soils,” that is non-toxic according to the EPA.

The various Bt strains contain spores that produce toxins that specifically target and only affect the larvae of specific pests. For instance, Btk (Bacillus thuringiensis kurstaki) targets caterpillars.

It’s important that you ensure you’re purchasing the proper Bt strain (in this case, israelensis).

Mosquito Bits are available online at Amazon.com, Lowes.com and Homedepot.com, among other retailers.

Since gardeners love to try their own methods, the two we’ve heard have met with the best results are to:

  • Sprinkle the Mosquito Bits onto the top of the soil and water the plant.
  • Follow the package instructions which suggests that you mix the bits with water, allow them to sit for a period of time and then water the plant with the solution.

You may need to repeat the application in a week or so to ensure that you get all the larvae.

Follow ALL precautions on the label and use only as instructed.

Why Some Homes Sell Faster than Others

There’s not much in life that is more confounding than to have your home sit on the market while those around you sell like a new Mercedes at a Chevrolet Spark price.

Of course, the real estate agent typically gets the blame, despite the fact that it’s rarely the agent’s fault. You’re laughing because the latter statement comes from a real estate agent. But wait – read on and you may end up agreeing with me.

Some People Clean their Homes

I think it’s safe to say that nobody wants to look at a dirty house let alone pay good money to live in it. Study after study has shown that homebuyers want “turn-key” homes – so they can move in without having to clean up after the former owner.

If cleaning isn’t your thing, hire a crew to come in and get your soon-to-be-for-sale home in shape and then all you’ll have to do is keep it that way while it’s on the market. If you don’t, you risk having your home sit while your neighbor’s gets all the attention.

Size matters

This may surprise you, but smaller homes sell quicker than larger homes. But consider this: smaller homes are priced within the range that first-time buyers typically shop and, since there are so many folks buying their first home, it makes sense that these sell quicker.

So, if your neighbor has a dinky home and yours is large, don’t be upset if his sells before yours.

By the way, two-story homes take longer to sell than single-level homes as well.

Price matters, too

The price of a home is the driving factor that determines how quickly – or even IF – the home sells. While it’s tempting to price the home above market value in your attempts to get the most money you can, it’s dangerous to do so.

A home’s market value is no secret – any real estate agent can run a quick analysis to determine if a home is overpriced. These homes don’t get shown. They sit. They languish and, eventually the seller has to drop the price just to get some nibbles.

Some listing agents are better at marketing homes

If your home is on the market and it’s not selling, ask your agent to show you what he or she is doing to market it. Depending on the type of home, at the very least, there should be evidence of heavy online marketing.

Check your MLS listing to ensure that the photos are clear and compelling.

The market itself may be the culprit

If your competition isn’t causing your home to sit on the market and your agent is doing his or her job and the price is right, it may be the market.

Markets change quickly and a seller’s market today can easily switch to a buyer’s market by tomorrow.

Although the current market is still hot for sellers, it is cooling. Homeowners are dropping their listing prices and budget homebuyers are leaving the market because of interest rate hikes.

A changing market doesn’t cause homes to not sell, it may just take a bit longer now than it would had you tried to sell a few months ago.

Lure homebuyers with an amazing patio/backyard

One of the biggest discoveries that Americans made during the lockdown is the great outdoors, even if that means time spent in the backyard. Whether that backyard is merely a patio, a place to grow vegetables or an expanse of land, millions happily fell into the outdoor craze.

It’s only natural then that outdoor space in their next home is high on their list of must-haves. In fact, “outdoor space” shows up on the list of the “… eight priorities you can expect to become prevalent in future home searches,” according to the Home Builders Association of Greater New Orleans.

If you plan on selling your home, this is the ideal time to whip that patio into shape – making it an irresistible, vacation-like escape for homebuyers.

The stats

The National Association of Homebuilders commissioned a survey of homebuyers and found that 82% of them dreamt of a home with a patio. This is the second most popular home feature.

First on the list? Outdoor lighting, with 87% of respondents wanting this feature.

The cost to install outdoor lighting, according to the NAHB, is between $260 and $530.

Consider ditching other potential fixups and concentrate instead on the backyard and patio.

Clean it up

The first steps to your makeover are very similar to indoor staging: clean and de-clutter.

The latter includes removing pet and kid stuff, such as toys, and anything else that detracts from the vacation vibe you hope to create.

Take stock of what you have and what you need

The amenities buyers will be seeking, especially on the patio, depend on their price range. For instance, a couple seeking a starter home isn’t expecting (hoping, maybe) a backyard kitchen on an expansive patio.

Consider your audience before starting the project. Who will be your most likely buyer? If you’re unsure, ask us. We’re happy to help you brainstorm.

Then, take stock of what you have, including:

  • Patio furniture
  • Pool and/or spa
  • Patio kitchen
  • Patio curtains
  • Décor
  • Plants and trees

Keep the goal in mind

Since it’s summer, homebuyers are looking forward to lounging in the backyard, or on a shady patio where they can watch the kids play. If your patio isn’t covered, consider purchasing a shade sail or an oversized patio umbrella.

Define the seating area with an outdoor rug on which to situate the furniture and potted plants to create an enclosure, or give the illusion of a wall.

Finally, don’t forget the little touches, such as an outdoor mirror, a fountain, garden statuary and/or wind chimes.

You’ll find lots of patio inspiration online at BalconyGardenWeb.com, Pinterest.com, BHG.com and HouseBeautiful.com.

Create a yummy backyard

Make sure the view from the patio (into the backyard) is staged as well. Get rid of plants that are dead or dying and make a list of replacements for them. Trim trees, shrubs and hedges and green-up the lawn.

And, speaking of views, if yours isn’t stunning, consider fast-growing trees or even clumping bamboo to block out the neighbors.

This task is easier when you understand what will grow in your area. Find your growing zone at Gardenologist.org.

Finally, apply a fresh layer of mulch in the planting beds to give the area a finished look.

Remember, we’re here if you need answers to your real estate questions.

Mortgage rates too high? Check out 3 government-backed loan programs

At this writing, mortgage rates are at 5.3% and we can expect them to rise again in late September.

This is why, if you’re hoping to buy a home this year, the time to do so is right now. Yes, rates have gone up, but don’t let that fact frighten you off.

Instead of a conventional loan, consider a mortgage that is guaranteed or insured by the government.

These loans are custom-made for Americans on a low budget that need a modest interest rate loan in order to buy a home.

Other benefits of these loans is that qualification is easier and the loans don’t require a high credit score.

Let’s take a look at three government-backed loan programs; one of which may just put you in a home.

FHA-backed mortgages

Overseen by the United States Department of Housing and Urban Development (HUD), the Federal Housing Administration (FHA) doesn’t make loans to homebuyers but instead, it guarantees the repayment of the loan should the borrower default.

Will you qualify for an FHA loan?

Homebuyers who intend to live in the home as their primary residence and are able to make the down payment, the monthly mortgage payments and meet other eligibility and credit requirements can apply.

The down payment requirement is largely determined by your credit risk, represented by your credit score. Typically, you’ll need a credit score of at least 620 for the 3.5% of the purchase price down payment. If your credit score is below that, plan on coming in with a 10% down payment.

Although FHA will insure loans for applicants with credit scores as low as 500 (which may change, so speak with your lender), most lenders won’t approve an applicant with a score lower than 620. Again, these numbers change occasionally, so speak with a lender.

The FHA mandates that borrowers who pay less than 20 percent down pay a Mortgage Insurance Premium (MIP) in addition to their mortgage payment every month.

While private mortgage insurance is required by most lenders of borrowers in similar circumstances, the insurance can be cancelled in the future. Not so with MIP – it remains for the life of the loan.

To apply for an FHA-backed mortgage, visit a FHA-approved lender. Find one near you at HUD.gov.

Rural Development Loan

The United States Department of Agriculture (USDA) offers approved borrowers a no-down payment loan. Most refer to this as the “USDA loan,” but the official title is the Single-Family Housing Direct Home Loan, also known as the 502 Direct program.

As with anything government-related, however, there are strings attached. The most important of these is that both the property and the borrower must qualify.

Get all the details about the Direct program at HUD.com.

The USDA also offers another loan, the Single-Family Housing loan program which is a guaranteed loan.

Loans are made directly by USDA Rural Development and for a period of up to 38 years, depending on the applicant’s income. To qualify for the guaranteed loan, borrowers must:

  • Meet income criteria.
  • Plan on living in the home as their full-time residence.
  • Hold U.S. citizenship or be what is known as a Qualified Alien or a U.S. non-citizen national.
  • Prove that they can make the payments on time.
  • The home must meet the USDA’s guidelines.

Properties financed with the guaranteed loan program must be located in an “eligible area.” You can find these areas online at HUD.gov.

To apply for this program, contact a local mortgage broker or lender or an approved lender from the USDA’s list.

VA Home Loans

The U.S. Department of Veterans Affairs offers a home-loan guaranty benefit. The no-down payment loans are offered to qualified, actively serving members of the military, veterans and their surviving spouses.

As with the FHA mortgage, private lenders provide VA loans and the Department of Veterans Affairs guarantees the repayment of a portion of the loan should the veteran be unable to meet his or her obligation.

This guarantee enables the lender to provide loans with no down payment required and more favorable terms.

Additional benefits of the VA-backed loan include:

  • There is no private mortgage insurance required
  • The VA dictates the amount the borrower pays in closing costs
  • There is no pre-payment penalty
  • Closing costs can be paid by the seller

Find out if you’re eligible for a VA-backed loan at benefits.va.gov.

You will need a Certificate of Eligibility (COE) and you can get one online or your lender can obtain it for you.

The best first step after learning your eligibility for any of these programs is to contact a lender.

What you need to know about a home warranty

The first thing you need to know about home warranties is that they are neither insurance nor warranties. They are, in reality, service contracts.

They were created to provide financial protection for homeowners faced with the failure of major mechanical systems, such as the home’s heating and air conditioning. Home warranties provide, most of all, peace of mind.

What does a warranty cover?

Home warranty companies offer a variety of plans and typically the more you pay, the more your plan covers. Most of the basic warranties – first tier and second tier plans – cover the following:

  • HVAC System – heating, ventilation and air conditioning system components such as heat pumps and ductwork.
  • Plumbing – all of the home’s interior plumbing system components such as pipes, drains, and faucets. Some home warranty plans cover outdoor plumbing as well, such as the sprinkler system. Some companies offer a separate policy for hot tubs and pools.
  • Electrical system – wiring, doorbells, electrical panels and other electrical system components are covered under either Tier 1 or Tier 2 plans.
  • Major appliances – the basic plan typically covers the range, refrigerator, garbage disposer, washer and dryer and water heater.

Exclusions

Ah, those nasty “exclusions.” Just like your health and homeowners insurance even a warranty contains them. Not everything in the home is covered under a home warranty. Like inclusions, exclusions vary, depending on company. The following are some common home warranty exclusions:

  • Normal wear and tear
  • Problems that arise from deferred maintenance
  • Insect or vermin damage
  • Damage caused by the homeowner
  • Structural problems (leaky roof, cracks in walls)
  • Acts of God (earthquake, flood, etc.)

Optional coverage, at additional cost, is usually offered for:

  • Well pump (highly recommended in Billings)
  • Septic system (again, if you have one, this is highly recommended)
  • Spa
  • Pool
  • Central vacuum system

How much does a home warranty cost ?

The average cost of a home warranty ranges from $360 to $1,425 a year, depending on the company and what the warranty covers. Most warranty companies offer a lump sum payment plan or a monthly payment plan.

“When paying monthly, the average starting cost for a basic plan is $36.32 per month,” according to Kathryn Parkman at consumeraffairs.com.

She goes on to say that you’ll pay nearly $69 a month, on average, for the comprehensive coverage.

In the event of a mechanical failure or appliance problem, you will place a call to the home warranty provider’s service department who will then send out a service technician of their choosing. The technician then bills the home warranty company directly, but you will be required to pay a service fee (think of this as akin to a health insurance co-pay) each time a repair person comes to the home.

The nationwide average service fee price range is $55 to $150, according to Meghan Wetland at bobvilla.com.

Many home warranties not only cover repair but replacement of appliances as well, meaning that if it can’t be repaired they will install a new one.

Are home warranties worth the money?

This is a hotly debated topic among real estate agents. Some say they aren’t worth the paper they are written on. Many more say that because of the peace of mind they offer new homeowners they are absolutely worth the purchase.

Especially during the first year you are in your new home, when you may be strapped for cash, if a major system in the home malfunctions, the price to repair or replace can devastate your savings. A home warranty offers both peace of mind and financial security.