USDA Loans
The USDA Single Family Housing Guarantee Loan, often called Rural Development (RD), is a zero down payment home loan insured by the United States Department of Agriculture. Their mission is to increase economic opportunity and improve the quality of life for rural residents by helping moderate income families achieve their home ownership dreams.
USDA Loan Details
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The home must be in an eligible rural area.
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The household must meet USDA monthly income caps. USDA will look at the income of the entire household, not just those who are on the loan. As a result, the income of any family member, age 18 or older, will be considered when determining if you income qualify for the program.
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The home must be your primary residence.
What areas are eligible for a USDA loan?
With the USDA Rural Housing Program, your home must be located in a rural area. However, the USDA’s definition of rural is liberal. Many small towns and suburbs meet the rural eligibility requirements.
How can I find out if my area is USDA-eligible?
Call us, we can tell you if the home is in an eligible area or, you can check the properties eligibility on USDA’s website.
Is there mortgage insurance (MI) on a USDA loan?
Technically, it’s not mortgage insurance. However, it’s very similar. USDA charges a 1% upfront guarantee fee, which is added to your loan balance at closing, and an annual fee of 0.35%, which is broken into 12 installments and added to your monthly mortgage payments.
Can I finance the Guarantee Fee into my mortgage?
Yes, the USDA will let you finance your Upfront Mortgage Insurance payment by adding it to your loan amount. For example, if you bought a new home for $100,000 and borrowed the full $100,000, your guarantee fee would be $1,000. You could then increase your loan size to $101,000.
What’s the maximum USDA mortgage loan size?
The USDA sets no loan limits, but the amount you can borrow is limited by your debt-to-income ratio. The USDA typically caps debt-to-income ratios at 41%. However, they can be more lenient if a borrower has compensating factors such as: a good credit score, stable employment and they have demonstrated ability to save.
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Is the USDA loan program limited to first-time buyers?
No, the USDA Rural Housing Program can be used by first-time buyers and repeat buyers alike.