USDA Mortgage Loan
What is a USDA MortgageLoan?
A USDA mortgage loan is backed by the United States Department of Agriculture (USDA). This special type of a zero down payment home loan was originally designed to provide a mortgage alternative for eligible home buyers in rural and suburban areas who had limited financing options to realize their dream of home ownership. As today’s populations grow and suburbs expand, a USDA home loan is no longer just for farmers and rural property owners, but also a viable option for people who want to live out of cities and enjoy country living.
USDA Home Loan Benefits
No Down Payment
The USDA loan comes with 100% financing. Borrowers have the flexibility to pay nothing out of pocket for a down payment, and allows the use of a gift or grant to go toward their mortgage. So a USDA mortgage can be a great low down payment mortgage option.
Competitive Fixed Interest Rates
Because the USDA home loan is guaranteed by the U.S. government, lenders like Homestead Mortgage can offer lower competitive interest rates that are not tied to credit scores or down payments to qualified individuals.
Low Mortgage Insurance
The USDA home offers the lowest numbers of any mortgage program. The upfront mortgage insurance rate is 1%, with an annual fee of only 0.35%, which can also be rolled into the loan to eliminate out-of-pocket expenses at closing.
Flexible Credit Guidelines
The flexible guidelines available on a USDA home loan allows potential homeowners with a less than perfect credit history, or lower credit scores to qualify and often meet the program’s guidelines.
USDA Home Loan Requirements
- Geographic Areas: Almost 97% of the U.S., which includes small towns and suburbs, are considered eligible properties for a USDA home loan. The USDA Mortgage eligibility map shows you the areas where you can use this loan.
- Income Limits: The USDA loan is for low to moderate income earners. All of a household’s income is considered, which can include income from a child or other family member living in the house but isn’t listed on the loan.