USDA Home Loans
USDA home loans offer 100% financing on a mortgage! That means no down payment is required. This can be an excellent way to purchase your home. You don’t even need to be a first time home buyer. Let’s go over some details.
What is a USDA home loan?
USDA stands for United States Department of Agriculture. USDA is also referred to as Rural Housing when it comes to home loan programs. They offer a few different programs, but the one we will discuss is the Single Family Housing Guaranteed Loan Program (SFHGLP). We will continue to just call it the USDA loan for the purpose of this article. These loans typically offer a lower interest rate and lower mortgage insurance compared to conventional programs with a low down payment. This helps create a more affordable house payment.
USDA loan basic guidelines
In order to qualify for a USDA home loan, the property which you are trying to purchase will need to be within the USDA boundaries. These boundaries are in more rural and agriculturally rich communities. Do not count on being able to use this loan if you are located in a big city. There are many communities across Utah, Idaho, and Wyoming that fall within the USDA boundaries. You can find your area eligibility with USDA by clicking HERE.
USDA does have income limits, but fret not. I find these limits to be much higher than most other down payment assistance programs. The income limits will depend on the county in which you are trying to purchase and will also vary depending on the household size. Keep in mind that the income limits are calculated with all anticipated annual household income. This includes those who are not on the loan who will be living in the home.
USDA Upfront Guarantee Fee
There is a 1% Upfront Guarantee Fee in order to use USDA. This means that 1% of the loan amount will be charged to use the program. The Guarantee Fee can be financed into the loan amount. The closing costs can not be financed into the loan amount. The seller will need to be willing to cover the closing costs in order for no money to be brought to the table. There are some tricks to getting the closing costs covered, but that is another topic for another day. The borrower does have the option to bring in the closing costs.
USDA Mortgage Insurance
As of the date of this article, the USDA annual mortgage insurance is calculated based upon the loan amount. This means as the principal owed is reduced, the mortgage insurance will also be reduced. The annual amount that is collected is .35% of the loan balance. That is substantially lower than the .55% that is collected with FHA loans. The amount of the mortgage insurance and guarantee fee has changed and will likely change at some point in the future.
Who should use the USDA loan program?
Those who do not currently own a home, have very little down payment, and are fine with searching for a home in smaller communities or more rural areas will benefit most. There are some exceptions with being able to purchase a home if you already own one, but those cases are few and far between. USDA can be a great option for a lower monthly payment compared to a conventional or FHA loan with a low down payment.
Do you qualify for a USDA loan?
When you are ready to find out if you qualify for a USDA loan, APPLY HERE. An experienced team member will reach out to you shortly and help guide you through the process and answer your questions. Don’t hesitate to share this article with your family and friends. A USDA loan may be the solution they are looking for!