USDA Loans (Rural Development)

USDA Loans

  • Zero Down Payment – 100% Financing
  • 640 Minimum Credit Score
  • 1.00% Upfront Mortgage Insurance Premium
  • Financed into Loan Amount
  • 0.35% Monthly Mortgage Insurance
  • Remains for Life of Loan
  • Income and Property Areas Restricted

USDA purchase loans, also known as USDA Rural Development loans, are mortgage loans guaranteed by the United States Department of Agriculture (USDA). These loans are designed to promote homeownership in eligible rural and suburban areas by offering affordable financing options.

Here are some key features of USDA purchase loans:

  1. Eligible Areas: USDA loans are specifically intended for properties located in eligible rural and suburban areas as defined by the USDA. These areas are typically outside of major metropolitan areas and have certain population limitations. The USDA provides an online tool to check property eligibility based on location.
  2. No Down Payment: One of the primary advantages of USDA loans is the ability to finance 100% of the home's purchase price. This means eligible borrowers can purchase a home with no down payment, making homeownership more accessible, particularly for those with limited funds for upfront costs.
  3. Income Requirements: USDA loans have income limits based on the location and size of the household. These limits are intended to ensure that the program benefits low- to moderate-income borrowers. The income limits vary depending on the area and the number of people in the household. Borrowers must meet these income requirements to be eligible for a USDA loan.
  4. Mortgage Insurance: USDA loans require borrowers to pay a mortgage insurance premium (MIP) as part of their monthly mortgage payment. The MIP amount is typically lower than the private mortgage insurance (PMI) required for conventional loans with a low down payment. The mortgage insurance helps protect the lender in case of borrower default.
  5. Credit Requirements: While USDA loans are more flexible than conventional loans when it comes to credit requirements, lenders still evaluate borrowers' creditworthiness. Generally, a minimum credit score of 640 or higher is recommended for USDA loans, although some lenders may consider borrowers with lower scores on a case-by-case basis.
  6. Loan Limits: USDA loans do not have a maximum loan amount. Instead, the loan amount is determined by the borrower's income, debts, and ability to repay. However, lenders may have their own internal limits based on factors such as the borrower's credit profile and the property's appraised value.

It's important to note that USDA loans are available for primary residences only and cannot be used for investment properties or vacation homes. Overall, USDA loans are a good choice for borrowers who want to purchase a home in a rural or suburban area and who do not have the funds for a down payment. They offer competitive terms, flexible eligibility requirements, and can help lower-income families become homeowners.