The USDA Rural Housing Loan is a program created by the US Department of Agriculture to help improve affordable homeownership opportunities for low-to-moderate income families in eligible rural areas. The home must be intended as your primary use and is not available for investment properties or 2nd homes.
The USDA Rural Housing Loan can be offered by approved lenders throughout the US, so applying for the loan is very similar to applying for most other mortgages.
Other USDA Resources:
Given the USDA Loan is backed by the government, it comes with a lot of advantages that the other government programs (VA and FHA) offer.
Interest rates fluctuate daily across the nation for each lender, so when determining what’s a “low” interest rate is based on the current market. That said, compared to interest rate of other home loan options, the USDA rates are always some of the best in the nation.
Typically, the interest rate on a 30-year fixed USDA loan is anywhere from .25%-.75% better than a Conventional Mortgage.
Unless you put 20% down on a Conventional Loan or qualify for a VA loan, you’re likely to have mortgage insurance. Most conventional mortgages, FHA loans and USDA loans require mortgage insurance.
Of all the loan programs, Rural Housing loans have the lowest fixed monthly mortgage insurance. On a USDA loan the mortgage insurance (called the ‘annual guarantee fee’) is set at .35% of the loan amount. Other loan programs are often higher. FHA’s MIP (Mortgage Insurance Premium) rate is set at .85% of the loan amount, and the PMI (Private Mortgage Insurance) on a Conventional loan can range anywhere from .35%-1.5% of the loan amount per year.
With USDA having a fixed mortgage insurance rate of .35%, it allows for the monthly payments to be far more reasonable than other loan options.
The USDA Loan is best known for requiring no down payment and is by far one of the greatest benefits it offers!
Other than the VA Loan, no other program offers such a benefit. Conventional Mortgages require anywhere from 3-5% down while FHA Mortgages require a minimum of 3.5% down.
For a more in-depth look at qualifying for a USDA loan, visit our article that explains the Rural Housing Loan in more detail.
Given that the USDA Loan is meant to assist low-to-moderate income households, there are set income limits based on the location and size of the household. Generally, the average USDA income limits are:
The challenge to meeting the income limitations is that USDA looks at the total household income and not simply the income of the individual(s) on the loan. This can sometimes present an issue if there are multi wage-earners and one makes a decent amount of money. Or possibly a family that has a grandparent living with them (as their pensions or social security income would be factored in the income limit calculation).
While being in a ‘rural’ area is subjective, the home may not need to be out in the “sticks” to qualify. USDA sets the parameters on eligible locations and even some suburban areas qualify.
The actual definition determined by USDA of a rural area is an area with a population under 35,000, is rural by nature, and is underserved when it comes to offering mortgages to low-to-moderate income families.
While the process of buying a house is different for every person, most loan programs follow the following path:
When you're' ready, we've offer a secure, safe and quick way to apply for a USDA Loan.
USDA loans are one of the best options in the country for nearly all borrowers, assuming you can qualify and meet the requirements. It’s very important to speak to a qualified loan officer early on to help with the calculations of income and debt-to-income ratios, as those can be some of the most challenging to determine on your own.
But if you meet the criteria and are looking for a home in an eligible area, there aren’t many options that offer more affordable payments and a small cash investment to get into a home!