The USDA Rural Development (RD) program, the last ZERO down payment option for home buyers, has been modified effective 10/1/11. The biggest change is that the RD loans now have mortgage insurance (PMI) built into the borrower’s monthly payment. This well help provide more funding for the program without hurting the tax payers.

Good news from this change is the Upfront funding fee is now significantly reduced. A $100,000 purchase price would have the funding fee reduced from $3,600 to $2,000, but also would add a monthly PMI of $25 to the monthly payment.

RD funding has NOT been approved for the new fiscal year yet. If your buyers do not have the full loan commitment, there may be delays before the additional funding is approved. Also, make sure to have buyer qualifications re-verified if they’ve been Pre-Approved for an RD loan due to the payment increase.