USDA Home loan, 0 Down Payment, Real Life Story Experience
Okay, so story time. This I wanted to share this experience with you for 2 reasons. One is to let you know if don’t have a VA there still opportunity for you to get a home with a USDA home loan with 0 down payment. Not available everywhere, but there are still some good areas where it is possible. Second, I want share a story, First time home buyers, don’t have any idea of what to expect or the process. This way you can get a feel of real life experience, of things that can go, on when you purchase a home.
I work in OC but I also still do, and have worked, in both San Diego and Temecula areas. I have lived in all 3 counties, OC, San Diego, and Temecula, so I am very familiar with where these areas are.
Brief Overview of USDA home loan with 0 Down Payment
First I want to let you know the type of home loan that allows 0 down is called the USDA home loan. No, LOL, you are not buying beef. USDA Home Loan is a government loan, it is for rural more areas, but really aren’t always so rural. In this situation my buyer wanted to buy in the cute little mountain town of Julian. There is a criteria for a buyer to qualify, location of property must be on their designated defined areas, and certain property conditions must be met but those conditions are very similar to FHA conditions, nothing too extreme.
Just have to add a picture of this charming little mountain store. I so LOVE these kind of old fashioned stores, seriously…hand on heart. How quaint.
First Connect with My Home Buyer
Let’s get into it. So one day I get a phone call for someone, who at that point became my client… She found my name and number on Trulia (a real estate website I used to write advise for). I had answered a questions several prior about USDA home loans and she was looking for information regarding USDA and found something I had written. The phone call began and I could tell she was frustrated from o the conversation and sound of her voice.
When she called, she had an agent in Julian. The agent had been shown some homes and my client, my client had wanted to put an offer on one. My client had not been by the agent she had to have loan approval first. You need an approval from a lender or a seller is not going to consider your offer. Not only did she not have an approval, she still was shy a few points she needed for her credit scores to qualify for the USDA loan. My client had a way to clear that up, she was smart but she wasn’t getting the right help and direction she from her lender either. The lender wouldn’t call her back.
My home buyer had really liked that home so she was so disappointed she couldn’t buy it. My client was simply and understandably frustrated with everything at this point. Neither the lender she had, nor the agent was helping her get to the position she needed to be to buy a her home. She was more than willing to do her part but she wasn’t getting help or guided in the right direction.
Getting Her Setup, Ready to Be Able to Purchase a Home with USDA loan
After getting all the facts… I knew it was going to be a challenge but I really wanted to help her Annnnd… Wha-hoo, It was really exciting for me because She wanted to buy in Julian and I LOVE LOVE LOVE the mountains. Not my usual area, actually never looked at homes up in Julian but I know my ability to sell in any area because my background as a computer programmer it’s all about analyzing data, that is 2nd nature to me. There are 2 homes on my list of goals. Being a nature lover, one is mountain home and one is a beach front home. Still waiting to sell the a beach front. 🙂
Important to HAVE a Lender with USD Home A loan Experience
I set her up with a lender familiar with USDA loans, while she was getting everything handled that she needed to do, I had my work cut out for me as well. Knowing there are several different things about homes in the mountains. Area requirements, heating types, and a few other things. Analysis also needed to done with both current and all of the year of sales, to know market values and where and how they differ. Not being familiar with the area, additional cabins mostly all are unique so it would require more analysis due to the fact that these not like track homes, generally all custom so to compare is more challenging. Not saying I did, but I Might have even broke out in song while doing once… Climb Every Mountain… 😉 Ha ha… Maybe I’m kidding and maybe I’m not… you’ll never know… LOL
Getting USDA home loan approved but Buyer has 0 for Down Payment
YIKES… Another challenge in this situation… We got her loan amount approved but come to find out, she had no money for closing cost either. It was already going to be a challenge to get a seller to accept a USDA loan because they get uncomfortable with something, they don’t know much about. Now, in this market, this was around 2013, that is going to be a major hurdle because most sellers are not willing to contribute to her closing cost, but we are going to give our best shot. If it can be done, I am one that going to do it!
I don’t care if the home price is $250,000 or in the millions, I am giving my all either way. To be perfectly frank, I work way harder on the less expensive homes because the transaction to purchase it tend to have more challenging issues. Having been a business systems analyst/computer programmer, I understand strategy to overcome problems, and a hurdle is only bad if we can’t get over it! To boot, that being said a couple of them have been among my favorite because they often have more heart, like you are helping them with dreams and those will always feel more gratifying and will be my favorites, and this was one. Well it was also one my dreams, so that added to the sweetness and joy of it!!!
Let’s Begin
I tell her first things first, let’s get you in purchasing position so you know where you stand and what the lender is willing to lend you, let me get you with a lender and get you approved, then we’ll take from there. Within 1 week, The lender I sent her to had her approved and ready to go… Hooray!!! We are good to go see a few homes, it usually doesn’t take that long but like I said, she had a few things to clear up.
Another challenges was the price range, the menu choices were very few (even back in 2013, she wanted to stay around $250,000). Game plan, we would have to watch and be on top of anything that came on the market, see them immediately. You get the drift, not impossible but we would need to be diligent in the search. She was approved for $300,000 but she didn’t want to go that high, she did not want to exceed $250,000. I completely understand and support that, glad that she was aware of her ability and comfort mortgage level. Life is about living, I think no one should live mortgage poor. IF it is feasible, okay. I thought it was, not easy and it was limited, but doable.
This photo here was a home she wanted to see. This photo was of the garage, hand painted on the side.
“I’ll take my wash bowl in my hand, and thither wind my way, to wash the gold out the sand… In California!” and then wonderful artwork of a miner mining for gold, it was quite charming. I wondered who did that, what was their story.
Here we go, Let’s Find that Special Home for Her
She wanted to go see a particular home… I get why she liked it.. It had a cute cabin charming appearance and the coolest artistic drawing with a gold miner on the garage. Honestly is the best policy, even if the truth hurts. It was going to be a problem to purchase though and not possible, and I told right up front. It is NOT doable for you but she wanted to see it anyway.
Why was not doable? I look at all details so I know what we can do. I investigated how much they owe to see the possibilities, if I can get the seller to pay for her closing paid for? That was… a No way Jose situation!!! Because they had only purchased it a year ago, they were asking what they paid for it. Knowing I need to get seller to pay the closing cost, that was NOT going to happen on this one. I analyze what seller owes before I present offer, they we not even going break even selling their home.
She still wanted to see it. It was cute and good for her to see, so she can gauge other what homes offered for their value in that price range. I loved the art on the garage and I was hoping to see some more history, so I agree to show her, as long as she understood she would not get it. I do think somewhere in the back her mind she was maybe hoping it could happen but I served it straight no chaser. In her circumstances it won’t work, she needs those closing cost paid for!!!
That was disappointing
Well, the home was disappointing. It had a few unappealing issues but worst than that, it most definitely had a bad vibe. we could both feel it. Something not good was happening there. I’m glad she didn’t think I was nuts for saying so. I know some people might think that is a weird thing to say but Yes, houses have vibes to me. LOL… A Home should have a happy vibe, and this one had a very dense negative vibe.
Onward to Next Home
Knowing we we going out I sent her one that I thought suited her needs well. She agreed to see it while we were out, but my instincts could tell she wasn’t crazy about it. The exterior wasn’t as cute and cabiny looking. Is that a word? Yes… I say it is, I am making it a word. LOL List price was $250,000 but I said what if I could get it for you for $230,000.
We headed over to it ,after the other cabin. From the moment we drove up, we thought it had nice appeal. As soon as we opened the door, it had a very happy light vibe. It offered a much better layout, quality, 2 bathrooms. It even had a bathtub which she really wanted, the other one didn’t. 2 really nice bedrooms, nice kitchen, a back door off the kitchen. We both really liked that. It…was… really… nice!!! It was on a quarter of an acre of land, a couple minutes to town. The cutest little garden supply shack that look like an outhouse. ha ha
Meeting the neighbors
We went out and about roaming the property, being the animal lover that I am, I go over to fence, calling over the neighbors goat and horse so I could talk to them. The neighbor comes out a shortly after. I never miss a chance to talk to neighbors because you can learn a lot of things about the neighborhood from them. Neighbors live there, they are usually pretty straight forward if you ask them direct questions or let them talk. So we introduce ourselves and I ask some questions. They way I see it, you might learn something you couldn’t have known otherwise. With that said, if I see one and the client is interested in the home… I ask.
Well… let me tell you… I got the ENTIRE 411 on the neighbor, and the town. I love small towns because most of them have great community spirit, in a different more warm and personal way! She was really nice and lived there many years, we got to know everything from A – Z. We talked for more than 1/2 hour. My client loved it there. I also got the 411 on the seller, he wanted out, it was a vacation home. I already knew he had good equity, so this was a bonus when it came to strategy for my buyer in putting an offer together. We found out there had been several mountain lions attacks, much more than usual. I think because of the drought. The neighbor said the seller asked, her not to tell the buyers, but she did. LOL This is life.
IMPORTANT NOTE:
A big mistake in disclosures for the seller, the seller is legally obligated to disclose everything including that the mountain lion situation. It could have come back to bite him for not disclosing it, but my buyer didn’t care. The mountain lion actually had recently attacked their goat and the horse stepped in to protect the goat and got wounded. the day I met the horse his eye had just fully opened back up. I digressed but I loved that brave horse, and the goat had beautiful blue eyes. and it’s all part of the adventure I liked… 🙂
The sweet eyes that I’m glad can still see… this was sweet little hero to the goat… and to me!!!
She Wants to Buy it and Make This One Her Home
We go back into the home… She is feeling really good about the home, she really is happy with it and she wants to buy it. I said let’s go down more. It had been on the market for almost 30 days, if it had it been the first day we probably would not have been able to do this. Strategy and human behavior is all part of knowing where and what to do.
We settled on a offer price of $225,000 However, seller had to pay all expenses, the septic tank inspection and empty it about $1500, title insurance, all transfer fees, home warranty. In addition to all those cost also up to $6000 of buyers closing cost. The only things my buyer was going to pay was home inspection and loan appraiser. FYI, Those are cost a buyer always encounters when purchasing a home. When I sent the offer I let the agent know really the offer was for $219,000 but we wrote it for $225,000 so that that indirectly buyer’s closing cost were wrapped up in there. It is a way of making the seller feel it wasn’t all on him.
Seller Said YES to my Buyers Offer
Now he wanted $250,000 so clearly he could have said no or countered but the offer was accepted… Happy Dance… That was GREAT News!!! Now to be clear here. Many sellers are NOT going to agree to that, I don’t want you to think every seller will. We had the right house with right seller with right circumstances. Turned out they found their dream home so selling both their properties, to purchased the new one so this was his 3rd escrow in a year and he was sick of being in escrow and just wanted it done… 🙂 Sometimes Luck is part of the process.
Home inspection had minor issues which is always the case of home, but 1 big one. It was a big one, a loan stopper. The roof is NOT GOOD. It needed a new roof. When purchasing using government loans, a roof needs to have a reasonable expected life, there was none. Okay, we have address this with the seller. I have to STOP the appraiser which has already been ordered because, if we can’t move forward, I don’t want my buyer having that none refundable expense on her. We tell him what the home inspector found, he is not happy at all because he has already accepted a price lower than he would have liked. At that point stated will not absorb the cost to replace the roof. I pause, give him time to absorb the shock of the news because that is never happy news to hear.
Negotiations are Vital in Real Estate Process
Negotiations are important, I think about how to address it to make everyone reasonably happy. Strong arming people is never best approach and rarely has happy endings. You see he he backs out with my buyer, still going to have address this with any government loan. Even a conventional buyer will not be happy with purchasing a home which needs the roof replaced.
I thought about how best to approach this, after talking with buyer knowing she still wants the home. Decided best first, give him 24 hours to cool down. Then, I propose a negotiation, He pays the entire expense up to $10,000, but we will try to get it cost lower than that. Buyer will pay anything over 10,000. We pick who does it, he pays to put the roof on before we close, the warranty goes to my buyer. She even got to pick the tile colors and in return we will up the purchase price of the contract to compensate for a new roof. The new purchase price would be increased by $5000 more, raising it to $230,000. so indirectly kind of splitting the cost. He agrees but will not put roof on until all contingencies are removed. Fair enough, deal, we are back on track.
Cute little garden shed that looked like an out house… 🙂
Let’s Get it Done
We reinstate the appraiser which took way too long to go out there… so I had to keep calling them which no doubt was a frustration, time is very important here. Contracts have date obligations and you try to keep everyone on track. Grateful the listing agent was very cooperative, we had to extend our contingency date. Finally it came in… Great news… it came in at $250,000… with everything said and done my buyer will be moving in with $20,000 equity and with a brand new roof! That’s a deal!!!
The roofer was just waiting for the okay, everything had already been picked out and ordered. Last week he got the roof up and we closed by skin of our teeth for lack of another expression because that was really tight make happen, for a while it looked impossible to close on time.
Closing Day
We met the seller on closing day, so he could tell my buyer some things would useful for her to know What a nice gentleman, there was an little outbuilding where he had a workshop. He would vacation there and make wooden toys for a charity for military children and children in hospitals. In our conversation he said he would play a trick on people that would come up and visit them. When they asked where the restroom was, he pointed to the garden shack and people would say really? And strolled out to it not happy, he would would enjoy some laughter while watching them open the garden shed and realized they had been punked. Amused I told the buyer you gotta do that to people and she agreed she would. LOL
Home Bought, USDA loan, 0 Down Payment – We did it!
A few challenging hurdles, some really Nice people to work with and that makes all the differences in the world. Closed USDA loan, 0 down payment and $20,000 (almost 10% equity) before moving in. I’d That’s a success. She was super happy with the home, and I got to sell a mountain home.
It’s all about YOU!!! It’s in the details with Heart, Strategy, Integrity, Knowledge, and Creativity… It ALL matters!!!
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Hi, I’m Dianne Hicks — a former business software analyst and programmer who traded debugging code for helping people build real wealth through homeownership. I’ve been a real estate agent for 17 years, and I truly believe owning a home (and investing wisely) can change your life.
My goal?
To help you start — or restart — your journey toward stability, confidence, and financial freedom.
I love breaking down the complicated stuff, translating real estate into plain English, and making the process feel a whole lot less intimidating (and maybe even fun).
If you want a knowledgeable guide who actually listens, speaks human, and loves helping people win… I’m your person.
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