New York Real Estate Salesperson ExaminationFinancingHard
A borrower is seeking a mortgage for a property that is located in a designated rural area. They have limited income, but the property itself meets specific criteria for basic, decent, safe, and sanitary housing. Which government-sponsored program is most likely to offer a 0% down payment loan for this borrower?
- AUSDA Rural Development loan
- BVA loan
- CConventional loan with PMI
- DFHA loan
Show answer & explanationAnswer & explanation
Correct answer: A. USDA Rural Development loan
USDA Rural Development loans (also known as Section 502 Direct or Guaranteed loans) are specifically designed for low-to-moderate-income individuals purchasing homes in eligible rural areas, offering 0% down payment and favorable terms to promote rural development.
Why the other options are wrong
- B. VA loans offer 0% down payment but are restricted to eligible veterans and service members, not based on rural location or general income limits.
- C. Conventional loans typically require a down payment, even with PMI, and are not specific to rural development or low-income borrowers in the same way.
- D. FHA loans require a minimum 3.5% down payment and are not exclusive to rural areas.
USDA Rural Development Loan
A government-backed mortgage program designed to help low- and moderate-income individuals purchase homes in eligible rural areas, often with no down payment requirement.
- 0% down payment possible.
- Targeted at eligible rural areas.
- Income limits apply to borrowers.
- Promotes rural development and homeownership.
Memory trick: VA and USDA: No cash needed, just the right path to tread.