Buying a home for the first time can be overwhelming – especially if you don’t have a hefty down payment saved up and ready to go. Many times, the best option is to rely on a special homeowner’s loan to assist you in the process.
USDA is a popular lender among low-income buyers due to its 0% minimum down payment. While this can provide the necessary assistance for some families, it also comes with fees, limitations, and can make finding a seller more difficult. See how the USDA loan compares with our Home.LLC investment.
- USDA: USDA loan eligibility differs based on location and income. Generally, they are for low-income buyers and only apply to rural areas.
- Home.LLC: All U.S. citizens and permanent residents.
Minimum Down Payment
- USDA: 0%
- Home.LLC: 2%
- USDA: Loan limits for USDA loans depend on your income and location. Use their calculator for an estimate.
- Home.LLC: Maximum home price of $2.5 million.
Chance of Buying a Home
- USDA: Many sellers don’t like dealing with USDA, as closing isn’t always guaranteed.
- Home.LLC: Sellers are likely to accept offers, since the closing process is seamless and guaranteed.
- USDA: 1%, which is able to be financed.
- Home.LLC: 0%
Upfront Mortgage Insurance Fees
- USDA: 1% upfront.
- Home.LLC: None.
- USDA: Since the down payment is frequently minimal here, mortgage payments stay higher due to a high loan to value ratio (can be 100%, with 0% minimum down payment).
- Home.LLC: Since the down payment is generally 20% here (with HomeLLC’s investment), mortgage payments stay low due to a low LTV ratio (80%).
Additional Monthly Fees
- USDA: About .35% of the loan’s balance for the remainder of the loan, paid monthly. This fee gets smaller every year as you pay off more of the loan.
- Home.LLC: None.
Portion of Appreciation
- USDA: You keep 100% of your home’s appreciation value.
- Home.LLC: You share your home’s appreciation value with HomeLLC.
Portion of Loss on Home
- USDA: You stand to lose 100% of your home’s depreciation value.
- Home.LLC: You share any losses with HomeLLC.
Both the USDA loan and the Home.LLC investment can be beneficial when looking to finance your first home purchase. The USDA loan is backed by the government – which does reduce risk, and requires no down payment. However, it comes with more fees, more limitations, and will result in higher mortgage payments.
Home.LLC maintains all the benefits of the USDA loan without these fees and enables you to keep your mortgage payments manageable. This isn’t just a loan – it’s an investment, which means you don’t have to worry about insurance, monthly add-on’s, or convincing hesitant sellers. How does this work?