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USDA Home Loans

Buying a home in a USDA-eligible area affords you special down payment and credit requirements for your loan.


What is a USDA Loan?

USDA loans are backed by the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program. USDA loans are available to low-to-moderate-income home buyers who are purchasing a home in a USDA-eligible area.

The USDA backing provides lenders a safety net in case the borrower defaults on the loan. Because of this decreased risk, USDA home loans offer 100% financing and low interest rates.

One of the most important benefits of a USDA loan is no down payment is required. This feature has helped many people access homeownership who otherwise would not have been able to purchase a home.

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How to Qualify

Applying for the USDA loan program means meeting the program standards.

Property Eligibility

While many people think that USDA-eligible properties must be in a farming area to qualify, this actually isn’t the case. The USDA defines a rural area in much broader terms. Approximately 97% of land in the United States qualifies for a USDA loan, including some suburban areas surprising close to the city limits. Even if you don't think your property is eligible, it's worth checking to make sure.

Eligibility requirements

To qualify for a USDA loan, home buyers must:

  • Purchase a home in a USDA-eligible area
  • Have a preferred minimum credit score of at least 640
  • Meet the income limits for the area
  • Occupy the dwelling as a primary residence
  • Be a U.S. citizen, U.S. non-citizen national or qualified alien

Income Limits

Home buyers must meet income requirements based on the property area to be eligible. USDA loans are targeted toward moderate earners, and borrowers must not earn more than 115% of the median income for that geographic region.

USDA Guarantee Fee

Although borrowers are not required to make a down payment, they are responsible for a 1% guarantee fee that can be rolled into closing costs. Additionally, USDA home loans include a 0.35% annual mortgage insurance (MI) fee paid in monthly installments.

Here's an example: A home buyer who purchases a $100,000 home with nothing down would pay a $1,000 mortgage insurance premium as part of their closing costs, plus a monthly mortgage insurance payment of $29.17.

Compared to other loan programs, like FHA, USDA loan fees are relatively low, which makes them an attractive option for eligible borrowers, especially first-time home buyers.

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USDA Mortgage Rates

USDA loans offer some of the lowest interest rates available. Like VA loans, they are guaranteed by the U.S. government, which protects lenders against potential loss. This removes much of the risk and allows banks and mortgage companies to offer lower rates to home buyers.

It's important to remember that many factors impact mortgage rates, including credit score and amount of debt. If you have questions about your credit score you should talk to your lender.

Apply for a USDA Loan

Unlike other loan programs, USDA loans can only be issued by USDA-approved lenders. Our mortgage experts are experienced with USDA loans and can help make the process easy for you. Find a loan officer now to get started.

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