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What is a USDA Loan?

What is a USDA Loan?

Let Elev8 Mortgage Help You Secure a Loan You Can Afford

Are you interested in buying a home? If so, you might want to learn more about federally-backed mortgages offered through the USDA loan program. The USDA loan program, also known as the Rural Development Guaranteed Housing Loan Program, are mortgages backed by the U.S. Department of Agriculture and offer qualifying low-to-moderate income borrowers the option of no down payment when they buy in a designated rural area. USDA loans also offer flexible guidelines to eligible applicants. Read on to learn more about USDA loans, and how Elev8 Mortgage can help you secure a loan you can afford, so you can buy your piece of the American dream. 

Elev8 Mortgage offers a variety of mortgage options to qualified home-buyers, but the USDA loan option is unique in that it is specifically designed for buying in rural areas. Rural areas include small towns and suburbs, and almost 97% of the U.S. is eligible. Intended to encourage home buying in less-populated areas, USDA loans aim to help create thriving communities and improve the quality of life in rural areas. USDA home loans offer benefits including:

  • No down payment: Down payments are often a big obstacle, especially for first-time homebuyers. USDA loans come with 100% financing, which means you won’t need the liquidity to make a down payment.
  • Roll closing costs into the loan: Closing costs are often an additional expense that can be difficult for home-buyers to afford. With USDA loans, the home buyer has the ability to roll the closing cost into the mortgage, meaning the buyer can finance more than 100% of the sales price.
  • Affordable mortgage insurance: With USDA loans, home-buyers benefit from low monthly private mortgage insurance. As of 2019, the upfront mortgage insurance rate on a USDA loan is just 1%, with an annual fee of only 0.35%. The upfront fee can also be rolled into the loan, eliminating an out-of-pocket expense at closing.
  • Low mortgage rates: USDA loans allow home-buyers to gain access to better-than-average mortgage rates, because USDA mortgage rates are discounted as compared to rates with other low-down payment loans.

No reserve requirements: With USDA loans, there are no reserve requirements, which are often an obstacle for first time home-buyers especially.

In order to qualify for a USDA loan there are income, location, and property requirements that must be met. At Elev8 Mortgage, we will walk you through every step of the loan process, ensuring that you understand and are comfortable with the guidelines for your mortgage. At a minimum, USDA guidelines require proof of U.S. citizenship or permanent residency, the ability to prove creditworthiness, typically with a credit score of at least 600, and a willingness to repay the mortgage – generally 12 months of no late payments or collections. Additionally, USDA loans include:

  • Income requirements: In order to qualify, applicants must prove stable and dependable income that is verifiable and likely to continue. The annual household income (the total projected income of every adult member in the household) cannot exceed 115% of area’s median household income. 
  • Location requirements: To be eligible for a USDA loan, the property must be in a USDA designated rural area. The USDA defines rural areas as open country, which is not part of an urban area; this broad definition makes approximately 97% of the nation’s land, including many suburbs, eligible. There are also population requirements that can reach up to 35,000 depending on area designation.
  • Property requirements: The USDA loan’s goal is provide a safe and sanitary residence for low- to moderate-income households; to meet this goal, the USDA sets basic property requirements that protect homebuyers as well as lenders. To qualify, the property requirements include:
  • The home must be used as the homebuyer’s primary residence
  • The site must have direct access to a street, road or driveway
  • The property must have adequate utilities and water and wastewater disposal
  • The property cannot be income-producing property (if the property includes barns, silos, commercial greenhouses or livestock facilities that are no longer used for commercial operation, the property may still be eligible).

USDA loans are an affordable, flexible option for home-buyers that find conventional loans unaffordable or out of reach. USDA loans can be used by first-time buyers and repeat home buyers alike, and homeowner counseling is not required to use the USDA program. To find out if you are eligible for a USDA loan, visit the USDA Income and Property Eligibility Site. The goal of the USDA loan program is to provide low-to-moderate income families living in rural areas with affordable homeownership opportunities. The USDA program works with lenders such as Elev8 Mortgage to make homeownership a reality. At Elev8 Mortgage in Bend. Oregon, our experienced team of licensed and local mortgage advisors work closely with home-buyers to deliver a clear and easy mortgage transaction. We pride ourselves on our unmatched service, on-time closing, local processing, and our wide variety of mortgage products that offer some of the most aggressive rates in the industry. Have questions? We are here to help! Give us a call at (541) 668-3053 today, to find out how Elev8 can help you make your home-buying dream a reality!

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