What Is USDA?
USDA stands for United States Department of Agriculture. USDA mortgages provide low-cost insured home mortgage loans that suit a variety of options. A USDA mortgage might be right for you if you want to purchase a home with no down payment and no monthly mortgage insurance.
What is the Guaranteed Rural Housing Mortgage?
– USDA Guaranteed Rural Housing Mortgage
USDA Guaranteed Loans are the most common type of USDA mortgage, allowing financing up to 100% financing for home purchases. USDA Guaranteed Loan applicants may have an income of up to 115% of the median household income for the area. All USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.
What are the advantages of USDA Mortgage versus Conventional Loans?
USDA programs are not totally credit score driven, although it is required to have at least a 620 FICO score to obtain an approval through most lenders. USDA mortgage guidelines are written in a way that provides the borrower the benefit of the doubt that there had been, at some point in their past, circumstances beyond their control, and as long as the borrower has recovered from those circumstances in a reasonable manner, they’re generally going to be credit-eligible for an USDA rural loan mortgage.
No Monthly Mortgage Insurance
A distinct advantage of a USDA mortgage, as compared to a conforming loan, is great interest rates and no mortgage insurance (MI). The daily USDA mortgage rates are usually comparable to a conforming 30-Year Fixed loan.
Require No Down Payment
USDA Mortgages have no down payment requirement. Other loan programs don’t allow this.
What factors determine if I am eligible for a USDA Loan?
To be eligible for an USDA Mortgage Loan, your monthly housing costs (mortgage principal and interest, property taxes, and insurance) must meet a specified percentage of your gross monthly income (29% ratio). Your credit background will be fairly considered. At least a 620 FICO credit score is required to obtain an USDA approval through most lenders. You must also have enough income to pay your housing costs plus all additional monthly debt (41% ratio). These ratios can be exceeded somewhat with compensating factors. Applicants for loans may have an income of up to 115% of the median income for the area. Maximum USDA Direct Loan income limits for your area can be found at here. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance.
See more on USDA Mortgage Requirements.
What is the maximum amount that I can borrow?
The maximum amount for an USDA home loan is determined by:
Maximum Loan Amount: The is no set maximum loan amount allowed for an USDA Residential Loan. Instead, your debt-to-income ratios will dictate how much home your can afford (29/41 ratios). Additionally, your total household monthly income must be within USDA allowed maximum income limits for your area.
Can I get an USDA Mortgage after bankruptcy?
Criteria for USDA loan approvals state that if you have been discharged from a Chapter 7 bankruptcy for three years or more, you are eligible to apply for an USDA mortgage. If you are in a Chapter 13 bankruptcy and have made all court approved payments on time and as agreed for at least one year, you are also eligible to make a USDA Loan application.
Maximum financing: The maximum USDA Rural Loan amount will be 102% of the appraised value of the home (100% plus the 2% USDA loan guarantee fee).
How much money will I need for the down payment and closing costs?
USDA Mortgage Loans require no down payment and they allow for the closing costs to be included in the loan amount (appraisal permitting).
What property types are allowed?
While USDA Mortgage Guidelines do require that the property be Owner Occupied (OO), they do allow you to purchase condos, planned unit developments, manufactured homes, and single family residences.