USDA loans are zero-down payment mortgages for eligible rural and suburban homebuyers. They are issued through the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, to promote accessibility to homeownership in less densely populated areas.
Benefits
- No Down Payment: One of the few loan options available that do not require a down payment.
- Reduced Interest Rates: Interest rates for USDA loans are typically lower than conventional loans.
- Lower Insurance Costs: Mortgage insurance premiums are lower than those for FHA loans.
Requirements
- Location: Homes must be located in an eligible rural area as defined by USDA.
- Income Limits: Income must be within specific limits, which vary by region and family size.
- Credit Score: Minimum credit score requirements vary by lender, but a score of 640 is typically needed to qualify for automatic underwriting.
Loan Options
Fixed-rate loans with terms of 30 years are the standard for USDA mortgages.
FAQs
- What types of properties are eligible for USDA loans?
- Eligible property types include new and existing properties, modular homes, planned unit developments (PUDs), eligible condominiums, and new manufactured homes.
- Are there closing costs with USDA loans?
- Yes, but they can often be rolled into the loan amount or paid by the seller, making it possible to purchase a home with no cash to close.
- What is the USDA funding fee?
- The USDA charges a 1% upfront guarantee fee, which can be added to the loan balance at closing, and an annual fee of 0.35% of the loan balance.
- Can I refinance a USDA loan?
- Yes, the USDA offers streamlined refinancing options that do not require a new appraisal, credit report, or property inspection.
- How do I find out if a property is in an eligible area?
- The USDA maintains an online map where users can check the eligibility of specific addresses.
