USDA Loans are becoming one of the most popular loan types in today’s mortgage market because of the favorable terms that they offer to home buyers across the nation. USDA stands for United States Department of Agriculture but USDA loans are used for much more than just farm loans. A USDA mortgage loan might be right for you if you want to buy a home with no down payment or mortgage insurance. If you’re unsure about your credit rating, or have concerns about a down payment, USDA mortgage loans can accommodate your circumstances with super low closing costs and no MI.
There are two types of USDA home loans that are commonly available for home purchases today. The first and most common type of loan is the USDA Guaranteed Rural Housing Program. USDA Guaranteed Loans allow for higher income limits and 100% financing for home purchases. USDA Guaranteed Loan applicants may have an income of up to 115% of the median household income for the area and all USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.
The second USDA program that is commonly available is the USDA Direct Rural Housing Program. USDA Direct Loans are less common than USDA Guaranteed Loans and are only available for low and very low income households to obtain home ownership, as defined by the USDA. Very low income is defined as below 50 percent of the area median income; low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI.
To be eligible for either USDA Home Loan program, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) must meet a specified percentage of your gross monthly income (29% ratio). Your credit background will be fairly considered. At least a 620 FICO credit score is commonly required to obtain an USDA approval. You must also have enough income to pay your housing costs plus all additional monthly debt (41% ratio). These ratios can be exceeded somewhat with compensating factors. Applicants for loans may have an income of up to 115% of the median income for the area. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.
The is no set maximum loan amount allowed for an USDA Home Loan. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area. The maximum USDA Rural Loan amount will be 102% of the appraised value of the home (100% plus the 2% USDA home loan guarantee fee).
If you are interested in purchasing a home with no money down and you are not a veteran of the military, there is no better mortgage option available in today’s market than a USDA Home Loan.
Please visit http://www.usdaloans-101.com for the most current information on USDA Home Loans and rural loans in today’s market.
USDA Home Loans FAQ:
Question: Does anyone know what interest rates are like for USDA home loans?
Credit score is above 750, debt to income ratio is pretty low, and we’re within the income bracket for it. We were looking at an FHA, but I saw that we might be eligible for this. I’m at work right now, and the only thing I have access to is the internet. I plan on calling someone in a little while, but I’m getting antsy and thought I would check to see if anyone had any ideas of what I could expect.
Answer: I just locked in an interest rate yesterday at 5 1/4%, but it has been fluctuating lately between 5 and 6%.
Question: Did the congress bill pass that gives more money for USDA home loans?
Answer: I found that they get money to give loans out at 100%. The government site is used to determine eligibility for certain USDA home loan programs. In order to be eligible for many USDA loans, household income must meet certain guidelines. Also, the home to be purchased must be located in an eligible rural area as defined by USDA.
Question: How do the new USDA home loans work?
I want to buy a house, but my credit score is poor, my husband’s is only 580, but my mon told me that my little sister and her husband just got a USDA loan with no money down and their scores are not good either. Is this an option for me or what should I do?
Answer: I believe USDA requires a credit score of at least 620.
Question: USDA home loans? Any recommendations of brokers/companies, what about Amerisave?
Right now my husband and I have been pre-qualified with Amerisave but I searched their name and there were some complaints about them. Also has anyone ever used Amerisave? I checked them on the better business bureau and they got an A and their rates are great but when I googled them they had some complaints about not closing in time so we’re checking out other companies/brokers.
Answer: Contact a LOCAL bank or mortgage broker, preferably one who is recommended by your real estate agent. Most mortgage brokers in rural areas are set up to do USDA loans. Home loans are too complicated to be done online, and in most cases, you will appreciate having a real person to deal with. A really excellent local loan officer will answer all your questions and even attend your closing with you.
Question: Where do you apply for a usda guaranteed home loan?
Answer: These loans are also called RD loans- (rural development)- you must have a 620 credit score but they will finance 100% plus the RD fee of 2%. Property must be in a rural location. Call any lender- ask if they do RD loans- you apply through an RD lender.
Question: If I am denied for a USDA home loan is there any other loan I can get for a home?
Answer: Sure, lots of loans out there, but those are only ones readily available with down payment assistance. If you are denied that, you’re not ready. Better that you save money for your down payment and plan ahead. Rushing into home ownership when you’re not ready for it is a large part of our economic crisis. You need good credit and savings to qualify nowadays. That’s the way it used to be, and is better operating practice than No-Docs loans. There is a first time homebuyer’s credit of up to $7500 when you file your taxes. Smart buyers put this money right on the principal of their loans, increasing their ownership stake in their home.
Question: What’s the advantage of a USDA home loan?
If I only qualify for a 100k with a conventional loan, am I still going to qualify for the same amount with a usda loan? Is the advantage that I can finance the closing cost and any other cost associated with buying a home and also I don’t need a down payment?
Answer: USDA loans are 100% loan programs. You will need to talk to your mortgage person because they have very strict guidelines on income and location (rural area).
Question: Does USDA home loan subsidize your mortgage?
Doing the math I (only) qualify for $102,000 home loan which will buy absolutely nothing in my community. If I use the USDA program will they match those funds or subsidize the loan somehow? I cannot afford to buy a home in my county because I do not qualify for enough money. Does anyone have experience with USDA?
Answer: I can guess that if you can’t buy a home under $102k then you aren’t in a rural area and that’s the only way you can get a USDA loan. You can consider moving to another lower cost area or waiting until you have a larger downpayment.
I’m not sure what “math” you’ve already done but you need to talk to a mortgage broker. You have to pay them but this is what they do. They will be the ones who prequalify you and tell you how much you can borrow. The last thing you want to do right now is get a crappy mortgage that won’t suit your needs for the entire time you plan on being in the home.