USDA Mortgage Loans
The United States Department of Agriculture (USDA) has developed several loans to help low- to moderate-income borrowers to purchase or refinance a home in a designated rural area. The mission of USDA Rural Development’s Single Family Housing Guaranteed Loan Program is to assist rural homebuyers achieve their dream of homeownership. For those who qualify, 100% financing is available, bringing the dream of home ownership within reach. With low interest rates and flexible guidelines a USDA home loan could help you achieve your financial goals. Many homeowners are surprised to find out how many properties just outside major cities qualify for a USDA loan even though they are anything but “rural”.
Why Are USDA Loans So Great?
USDA loans are a very attractive option for borrowers who want to purchase a home or refinance their current USDA mortgage. USDA loans are for rural areas but rural does not necessarily mean remote. Do not assume that the eligible properties are all located miles and miles from civilization. A quick eligibility check will allow you to track down homes that meet the USDA guidelines. Guess what? Many of them are in close proximity to some of the nation’s fastest growing metro areas. USDA financing is one of the only mortgages available other than those for members of the US military that offer zero money down. It is an excellent option for those with low to moderate incomes or less than perfect credit. Payments are kept affordable, thanks to the fact that the loans are 30-year fixed rate mortgages.
What Are the Advantages of USDA Loans?
- No down payment
- Credit scores down to 600
- No maximum purchase price
- Up to 50% debt to income ratio
- Easy to use gifts for closing costs
- Allows for 6% seller paid closing costs
What Are the Waiting Periods After a Hardship?
- 3 Years from Foreclosure or Short Sale
- 2 Years from Discharge of Chapter 7 Bankruptcy
- 1 Year from Discharge of Chapter 13 Bankruptcy
What Are the Eligibility Requirements for a USDA Loan?
As part of the American Recovery and Reinvestment Act that came about in 2009, the requirements for USDA home loans have become more streamlined and opened the door for higher eligibility rates. Borrowers must still meet certain income requirements and provide a credit report; however, the guidelines are not as strict as they were previously. Below are the top eligibility requirements to get familiar with before you consider a USDA loan.
- Geographic Area. The home you are buying must be in one of the geographically qualifying areas which are designated as Rural for USDA Loans. *********TODO NEED LINK FOR THIS -> to quickly find out if the property is located inside an eligible area.
- Property Type. The home you are buying must be a single family residence. It must also be your primary residence
- Credit. All USDA Loans require a credit score of a least 600 or higher to qualify.
- Debt Ratio. Typically with a full approval your total debt to income ratio can be as high as 50% in some cases.
- Income Limit. USDA Loans have a maximum income limits for the median income in your area. If you make more money than the limit, you will not qualify. There are different brackets for determining the maximum income allowed. Those are determined by your geographic area and the number of people living in the household.
What Are Some Popular USDA Programs?
Standard USDA Purchase
- Up to 102% LTV
- 30 year fixed only
- No maximum purchase price
- Closing costs can be financed
USDA Streamline Refinance
- No appraisal needed
- No income verification
- Reduced documentation
- Must lower your rate by 1%
Be sure to take a close look at USDA and their programs to find out which one is right for you.