The Lending Coach

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The USDA Mortgage – A Primer and Changes in October 2016

usda-rural-development-home-loan

USDA home loans are regular mortgages backed the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program.  These types of loans are not just for farmers  – the USDA home loan is widely-available for all types of places and individuals.  97% of the geographic United States is in USDA loan-eligible territory.  These loans are available to home buyers with below-average credit and income, offer 100% financing with reduced mortgage insurance premiums, and feature below-market mortgage rates.

Using a USDA loan, buyers can finance 100% of a home’s purchase price while getting access to better-than-average mortgage rates. This is because USDA mortgage rates are discounted as compared to rates with other low-down payment loans.

Here’s the big news:  beginning October 2016, USDA fees will drop to 1.00% paid at closing, and 0.35% paid annually!

 

USDA-Mortgage-Lender-WisconsinUSDA loan rates are often lower than comparable conventional 30-year fixed mortgage rates. Plus, because mortgage insurance rates are lower, with your small down payment, USDA loans can often be a better deal as compared to FHA loans or conventional loans.

The USDA Rural Development loan is meant to help households of modest means get access to housing and mortgage loans in some of the less-densely populated parts of the country. By enabling home ownership, the USDA helps to create stable communities for households of all sizes.

How do I check if my home eligible for a USDA loan?

With the USDA Rural Housing Program, your home must be located in a rural area. However, the USDA’s definition of “rural” is liberal. Many small towns meet the “rural” requirements of the agency, as do suburbs and exurbs of most major U.S. cities.

97% of the United States is USDA loan-eligible. Only 3% is ineligible.

What’s the maximum USDA mortgage loan size?

There is no maximum loan size for the USDA loan program. The amount you can borrow is limited by your household’s debt-to-income.

The USDA typically limits debt-to-income ratios to 41%, except when the borrower has a credit score over 660, stable employment, or can show a demonstrated ability to save.

Is the USDA loan program limited to first-time buyers?

No, the USDA Rural Housing Program can be used by first-time buyers and repeat buyers.

country-home-house-plans-2380-your-luxury-and-country-home-plans-available-at-the-home-plan-shop-368-x-276Can I finance the Upfront Mortgage Insurance into my mortgage?

Yes, the USDA will let you finance your Upfront Mortgage Insurance payment into your loan size.

For example, if you bought a home for $100,000 and borrowed the full $100,000 from your lender, your Upfront Mortgage Insurance would be $2,000. You could then raise your loan size to $102,000.

EqPlease feel free to contact me to find out more!

Source: The Mortgage Reports

1 Comment

  1. The changes take effect June 2, 2016 and apply to mortgages issued through USDA and those where USDA has issued a loan note guarantee.

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