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.
In order to qualify for a USDA loan there are income, location, and property requirements that must be met. 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. In order to qualify, applicants must prove stable and dependable income that is verifiable and likely to continue, and annual household income (the total projected income of every adult member in the household) cannot exceed 115% of area’s median household income. The USDA also sets basic property requirements, including that the home must be used as the homebuyer’s primary residence, the site must have direct access to a street, road or driveway and have adequate utilities and water and wastewater disposal, and the property cannot be income-producing property. At Elev8 Mortgage in Bend and Central Oregon, we work with our clients to find the best mortgage product for your needs.