Are you a city-slicker looking for a change of scenery? Lucky for you, the United States Department of Agriculture (USDA) created a home loan that is meant for people who are looking to live further off the grid. Let us introduce you to USDA loans and what you need to know about them.

First things first, USDA home loans are NOT for farmers. This program might hold that preconception, however, this loan is available to anyone looking for a residential property in an eligible rural or suburban area. The USDA’s definition of rural is pretty lax, so make sure to check their property eligibility maps to see if the area you’re interested in meets their definition.

There are many benefits that make this loan program appealing.

• No down payment

– You read that right. USDA loans allow buyers to finance a home for up to 100%* of the price so there is no down payment requirement.

• Lower credit scores are acceptable

– Don’t worry if you have less-than-perfect credit. Scores of 640 and higher will have faster processing, while 640 and below might face more strict underwriting standards.

• No loan limits

– The USDA does not have loan limits in place. That means your purchasing power may be higher than it would be with another loan program. Your lender will be able to help you determine how much you qualify for.

• Multiple property types

– Eligible property types include existing, new construction, condos, town homes, manufactured**, modular, and short sales or foreclosed homes.

What are the requirements?

• Legal U.S. citizen and 18 years or older
• The home must be for primary residence
• Stable and dependable income
• Adjusted household income is equal to or less than 115% of the area median income

Most other requirements for a USDA loan are very flexible, including credit and employment history.

Are you’re ready to leave the city behind? A USDA loan may be right for you! If you have questions about buying a home with a USDA loan, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!

*100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. **Only new manufactured homes are permitted, and they must come from eligible dealerships.

Time's up

Over the past several months, we have answered the top questions about the top mortgage loan options. Our final blog in this series will answer the top 5 questions about United States Department of Agriculture (USDA) loans. If you are considering buying a home, read on to find out whether a USDA loan might be the right choice for you.

USDA Loans
USDA home loans are insured by the United States Department of Agriculture. This loan program allows low- and moderate- income households to purchase homes in eligible rural areas. Home buyers who do not qualify for a conventional mortgage may be able to purchase a home with a USDA loan.

• Who is eligible for a USDA Loan?
  Low- to middle- income home buyers looking to purchase houses in eligible rural areas may qualify for a USDA loan. Other USDA requirements can be found here. Your lender may also have other eligibility requirements, including a minimum credit score.
• How do I know if I meet the income requirements for a USDA loan?
  Income requirements for USDA loans vary by county, and are also based on the number of persons in your household. You can see what the income limits for your area are by visiting the USDA website.

• How can I find out if a property is in a USDA eligible area?
  The USDA website allows you to search property addresses to determine whether they meet Rural Development rural area requirements. What qualifies as rural may vary from place to place, but includes factors such as the area’s population and development.
• Can I purchase a second home with a USDA loan?
  USDA loans are designed to help eligible home buyers attain a primary residence, and cannot be used to obtain a second home.
• What are the benefits of a USDA loan?
  The chief benefit of a USDA loan is that it allows home buyers to obtain 100% financing* for the home, with no down payment required. Additionally, the USDA does not have loan limits in place, so your purchasing power may be higher than it would be with another loan program. Your lender will be able to help you determine how much you qualify for.

If you are looking to purchase a home in a rural area, a USDA loan may be the right financing option for you. For more information about USDA loans, please visit the USDA website. If you have more questions about buying a home with a USDA loan, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!

*100% financing, no down payment is required.  The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. Loan is limited to the appraised value without the pool, if applicable.

If you are in the market for a new home, one of the first things you should consider financially is how much of a down payment you can make. Most home buyers know that the most common mortgage loan (a Conventional loan) requires 20% down payment. This means that if you purchase a home worth $200,000, you must have $40,000 cash available, on top of the closing costs needed to purchase the home. This may deter many potential home buyers from purchasing because they only have a small amount of money saved. However, Conventional loans are only one of the many loan options available. Here are five of the most widely used mortgage loans and their down payment requirements.

FHA Loan – 3.5% Down Payment*

A Federal Housing Administration (FHA) loan is a mortgage loan that is insured by the government’s Housing and Urban Development (HUD) agency. FHA loans require a 3.5% down payment for purchases and it typically offers very competitive rates compared to rates from a conventional loan. Due to the low down payment, FHA Mortgage Insurance Premiums (MIP) are required in order to protect lenders against losses as a result from defaulted mortgages. There is an up-front premium paid at closing, and a monthly premium that is paid along with the monthly mortgage payment. FHA has several guidelines that all loans must meet, such as loan limits, allowable closing costs, and debt ratios.

VA Loan – 100% Financing**

A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). VA loans help service members, veterans, and eligible surviving spouses purchase a home with a competitive interest rate, limited closing costs, no Private Mortgage Insurance (PMI) requirement, and often without a down payment (as long as the sales price doesn’t exceed the appraised value). This is because VA guarantees a portion of the loan, which allows the lender to provide favorable terms. VA loans have several guidelines that all loans must meet, such as eligibility and loan limits.

USDA Loan – No Money Down^†

A USDA loan is a mortgage loan guaranteed by the United States Department of Agriculture (USDA). With a USDA loan, home buyers can purchase a home in eligible rural locations with no down payment, and can finance up to 100% of a home’s appraised value, plus closing costs. For eligible borrowers, USDA loans often come with the lowest interest rates and program insurance premiums of all government-backed loans. USDA loans have several guidelines that all loans must meet, including property eligibility and income eligibility.

80-10-10 Loan – 10% Down Payment

Also known as a Piggyback loan, an 80-10-10 loan is a great option for home buyers who have great credit but lack capital, and wish to avoid paying PMI. The mortgage loan works by having 80% of the property value covered by a first loan, 10% of the property value covered by a second mortgage which carries higher interest rates than the first conventional mortgage, and 10% will be covered by the home buyer’s down payment. Loans that are 80% or less of the home value do not require PMI.

State Bond Programs – Specific Assistance

Several U.S. states offer state bond loan assistance programs. These bond programs aim to help first-time home buyers or buyers with low capital by providing below-market interest rates, down payment assistance, long term affordability, and/or other benefits specific to the programs. These loans have program-specific income and occupancy requirements, and limitations.

There are many more mortgage loan options available not mentioned but these are the most commonly used. If you are looking to purchase a home soon, make sure you speak with a licensed mortgage loan originator. Choosing a down payment option is a big decision and a licensed mortgage loan originator can help you find options that best fit your needs. They can also walk you through the loan process and explain to you all of the eligibility requirements for the loan you choose.

*LTV’s of up to 96.5% for FHA loans. **Veterans Affairs loans require a funding fee, which is based on various loan characteristics. †100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. Loan is limited to the appraised value without the pool, if applicable.