USDA Mortgage

USDA Mortgage

A USDA loan, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan offered to rural property owners by the United States Department of Agriculture (USDA). The program is designed to improve the economy and quality of life in rural America. It offers 100% financing to qualified buyers, and, in many cases, borrowers can even finance the closing costs as part of the loan.

Benefits of the USDA Loan:

  1. No Down Payment Required: Borrowers can finance up to 100% of the property’s value. This is one of the few mortgage programs that doesn’t require a down payment.
  2. Competitive Interest Rates: The loan is guaranteed by the USDA, so lenders are able to offer low-interest rates to borrowers. These rates are often lower than what is available for conventional or FHA loans.
  3. Flexible Credit Guidelines: While credit requirements can vary by lender, the USDA loan program often accommodates borrowers with less-than-perfect credit.
  4. No Loan Limits: USDA doesn’t define a maximum loan amount. However, the amount you can borrow is limited by your income and the lender’s underwriting standards.
  5. Not Limited to First-Time Homebuyers: While the program is especially beneficial for first-time homebuyers, it is not exclusive to them.
  6. Loan Repayment Flexibility: There are provisions for adjusting the repayment schedules based on the borrower’s circumstances.
  7. Low Mortgage Insurance: The upfront guarantee fee and annual fee (similar to mortgage insurance) for USDA loans are typically lower than the mortgage insurance premiums required for FHA loans.
  8. Broad Property Eligibility: While USDA loans are often associated with farms, many types of properties can be financed using this loan, including existing homes, new construction, modular homes, Planned Unit Developments (PUDs), eligible condominiums, and manufactured homes. The property must be located in a USDA-designated rural area, but you’d be surprised by how expansive the USDA’s definition of “rural” can be.
  9. Use for Various Residential Purposes: Apart from purchasing a home, the USDA loans can also be used for refinancing and home repairs or improvements.
  10. Safety Standards: Homes financed through the USDA loan program must meet certain safety and quality standards, ensuring that borrowers move into safe and structurally sound homes.

It’s important to note, however, that USDA loans come with certain income restrictions (both maximum and minimum), and not every property will qualify due to the program’s geographical limitations. Prospective borrowers should work with a lender familiar with the USDA program to determine their eligibility and find properties that are eligible for financing.

In conclusion, the USDA loan program offers an array of benefits for those looking to purchase homes in rural areas, making homeownership accessible and affordable for many who might not otherwise qualify for traditional mortgage programs.

Connect with a licensed USDA Mortgage Broker, ask questions, see what cities qualify, and get free quotes.

Not sure if your home qualifies for USDA Financing?  Use the USDA Lookup Tool.

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