Kansas USDA Loan – USDA Rural Development Loan
Are you looking to purchase a home in a rural area of Kansas? The USDA provides an unbeatable opportunity to buy a home with 100% financing, low interest rates, and other special loan terms. Why does the USDA provide these types of loans? The purpose of the USDA home buying program is to promote homeownership in rural areas, especially for low-to-moderate income families. By providing special homeownership programs, rural communities can develop faster and thrive.
The way the program works is if you can meet certain qualifications you can get a home loan through the USDA directly or through a USDA lender (such as us). There are two types of USDA loans:
- USDA Guaranteed Loan – The guaranteed loan is the more common loan program and accommodates to many more ranges of income. In fact, in some areas, household incomes can be as high as $120,000. This rural housing program is known by a few different names, such as the “502 USDA Guaranteed Mortgage”, “Single Family Housing Guaranteed Loan Program”, or just “USDA Guaranteed Loan”. These all mean the same thing and are the same program.
- USDA Direct Loan – The direct loan is for the lowest end of the income spectrum, and has a lot more limitations for who will qualify. It is for individuals or families with the very low income. These loans are originated and funded by the USDA directly. We do not issue these loans, nor does any Kansas USDA lender. You must apply through the Department of Agriculture. Again, this is only for the lowest end of the income spectrum.
Kansas USDA Loan Requirements
A great aspect of USDA loans is that the way you qualify is actually very different than other loans, such as conventional and FHA mortgages. While other programs require you to show more income, better credit, and more assets, the USDA is actually looking for those who have a harder time getting a loan.
- Credit – Minimum credit score of 620. Occasional exceptions are made, but this is the standard credit requirement.
- Income – Income is limited to 115% of the median income in the applicable county. This means your household income can not be more than 15% above the median income for your county. The income limits for USDA loans depends on your county and how many people live in your household. The number of persons includes you, your spouse, your children, and anyone else living in your home. The USDA has a very useful income eligibility tool which allows you to calculate your eligible income, make certain deductions, and then see if your income qualifies.
- Owner Occupied – No rental properties are allowed. You must occupy the home you want to buy with a USDA loan. Another requirement is that the home be either a single family residence, or a condo. Some USDA lenders in Kansas will allow mobile or manufactured, but we do not offer USDA loans for these property types.
- Property Eligibility – USDA loans are intended for rural development and therefore exclusively available for homes in rural and select suburban areas. You can look up properties by address on the USDA property eligibility search. This tool also allows you to view a map with ineligible areas shaded in. USDA loans are intended for rural development and are not available to finance a home purchase in larger cities.
So Where in Kansas Can You Get a USDA Loan?
USDA loans are available throughout the majority of Kansas with its vast rural zoning. The only excluded areas which are not eligible are cities and larger towns with a population over 30,000. If you want to buy a home in these areas, and are looking for another great option, consider a FHA loan. For the rest of Kansas, both remote areas and other towns such as: Derby, Dodge City, Emporia, Junction City, Garden City, Gardner, Hays, Liberal, Newton, Pittsburg, and Prairie Village, a USDA loan may be the perfect loan of you. This is just a small sampling of some of the towns that USDA loans are commonly utilized in. To find out if the home or area you want is eligible, use the property search or give us a call and we can help you determine property eligibility.
A Few Significant Benefits of USDA Loans Are:
- No savings or assets are required.
- Rates are lower than FHA or conventional loans.
- Mortgage insurance is cheaper than FHA MIP. Use the calculator below to calculate mortgage insurance costs and your estimated monthly payment:
USDA Guaranteed Loan Calculator
Use the calculator below to estimate how much your monthly payment and mortgage insurance will cost. To learn more about how to use the calculator, click the button below it which describes how it works.
USDA Mortgage Calculator
Total Monthly Payment
|USDA base loan amount||$0|
|USDA total loan amount||$0|
|Principal & interest||$0|
|USDA guarantee fee 2.75%||$0|
- Price of Home – Enter the price of the home you want to buy. If you do not have a home in mind yet, just add in a number in the range you expect to want to buy a home for.
- Mortgage – The second field titled “mortgage”, is by default on a 30 year fixed loan schedule. This is the most common loan repayment schedule selected for USDA loans. You can also select a 15 year mortgage.
- Interest Rate – The interest rate a borrower receives depends on their credit, income, and other qualifying factors. To get an actual rate quote, you will need to speak with a licensed loan officer. You can call 1-800-731-3560 to get prequalified and receive a rate quote.
- Down Payment – USDA loans do not require a down payment. If you would like to put money down, reduce the amount you put into the Price of Home field to reflect how much you want to use as a down payment. So if you want to buy a $150,000 home, and plan to put $10,000 down, then add in $140,000 for the Price of Home, which will serve as your total loan amount for the purpose of calculating your expected payment.
- Property Taxes – Add the annual taxes for the home you want to buy. To find out how much the annual property taxes are, check with the county assessor. You can also ask a real estate agent to help you find out what the exact annual property taxes are for a home you are interested in.
- Annual Insurance – The amount that the annual homeowners insurance will cost depends on the property you intend to buy, your homeowners insurance claim history (if you have owned a home before, and had to make a claim), and the specific homeowners insurance company that you select to insure your home.
- Down Payment – This is the percentage that is calculated based upon the home purchase price and the down payment amount.
After submitting information into these fields, it will calculate how much the monthly mortgage payment will be based upon what is entered. The next set of data presented on the right side and shows under the total monthly payment is as follows:
- USDA Base Loan Amount -This is the amount of your loan after subtracting your down payment from the total, but prior to adding in the USDA upfront mortgage insurance premium (UPMIP).
- USDA Upfront Mortgage Insurance – All USDA loans require a 2.00% upfront mortgage insurance premium to be paid. This is calculated from the base loan amount. This 2.00% is the same for any borrower and on any type of USDA loan. It does not vary from one lender to another.
- USDA Total Loan Amount – This is the combined total of your USDA base loan amount (after subtracting the down payment), along with the upfront mortgage insurance fee. You have the option to pay the mortgage insurance amount out of pocket, or you can wrap it into the loan amount. Most decide to include it in the loan amount, so we have it automatically added on the calculator.
- Principle and Interest – This is the amount of your mortgage payment before adding mortgage insurance, and property taxes, and property insurance.
- USDA Monthly Mortgage Insurance – This is the monthly mortgage insurance premiums required on all USDA loans. This amount is 0.40% of the principle loan balance. It is recalculated each year and goes down as your loan balance does.
- Monthly Escrow – This is how much your property taxes and property insurance is after taking the annual amounts and dividing them by 12 monthly payments.
Would you like to find out if you qualify or a USDA mortgage loan? We can help you get pre-approved over the phone or you can learn more and apply for a USDA loan online. Our consultation is free of charge, which will include finding out if you are eligible, how much you can borrow, and also connect you with a real estate agent familiar with these programs.
Below Are the Most Frequently Asked Questions About USDA Home Loans
Can I get a USDA loan if i already own a home?
The rural development loan can only be used for a home that you occupy. If you already own a home, you will not be able to get a USDA loan, unless you are planning to sell your home. If you want to sell your current home, and obtaining financing through the USDA for a new rural home purchase, give us a call. This is a bit more complex and we can guide you in how to do it.
Are USDA Loans Assumable?
Yes, USDA loans are assumable, but they can only be assumed by someone who meets all of the standard guidelines for getting a USDA loan. The person who would assume the loan has to meet all of the standard guidelines, such as income eligibility, not already a home owner, and everything else required for USDA financing.
How Much Can I Borrow with a USDA Loan?
The maximum loan amount that you can borrow is based upon your income. It is actually not as much based upon the total amount that you make, but the ratio of your debt versus income (debt-to-income ratio).
To determine how much you can personally borrow (after verifying eligibility), you need to total your monthly household income, calculate your monthly debts, and then see what percent of your monthly income your debts are. Do not include rent, but only student loans, auto loans, credit cards, and any other debts which require a monthly payment and show on your credit report.
The maximum percentage of your income that your mortgage payment can be is 29%. So for a $4,000 household income, the max amount your mortgage payment can be is $1,160. Now, what is the most important ratio is the total amount of your monthly debts, in addition to your mortgage payment. This is called your “backend ratio”. The highest backend ratio that is allowed is $41%. So your monthly debts and new mortgage payment together must not exceed 41% of your income. If you make $4,000/month, this equals $1,640/month.
In terms of the max loan size that someone could potentially borrow, most lenders are capped at the conforming loan limit for your county, which for most of the USA is $484,350.
How Much Are USDA Closing Costs?
The closing costs for a USDA loan vary, which depends on loan size, and other specifics to your loan. We provide what is called a “Good Faith Estimate” which shows what your loan fees will be (which is a very accurate estimate).
How Much is the USDA Guarantee Fee / Mortgage Insurance?
Use our USDA loan payment calculator to see how much mortgage insurance will cost for your loan. All USDA loans require a 2.00% upfront cost, as well as 0.40% of the loan balance calculated annually, and then divided into 12 monthly payments including on your mortgage payment. The monthly amount goes down each year as you pay off your loan balance.
How Much is the Down Payment on a USDA Loan?
There is no down payment required on a USDA loan. You can put money down if you would like though. If you intend to place as much as 3% down, we will help you determine which loan program is best for you by comparing your options, such as through the FHA and conventional loans.
How to Check USDA Loan Status?
If your loan is through us, call 1-800-731-3560 and you will be forwarded to your loan representative or loan processor. You can find out what the status of your loan is, including estimated close date.
How Long for a USDA Loan Approval?
Most USDA loan applications are either approved or denied within 24 hours. However, if there are any issues, or if the approval needs a senior underwriter to review the application, it can take longer. In these cases, a 48-72 hour period may be needed. The majority of applications are processed within 24 hours though.
Can USDA Loans be Used for Land?
Yes. You can use a USDA rural development loan to fund the purchase of land, but only if it is used for new home construction. You can not only buy a lot of land, nor can it be used for farming / agricultural.
Can USDA Loans be Used on Foreclosures?
USDA loans do NOT have any restrictions on purchasing a home that has foreclosed. The home must be move in ready though. It can not be in terrible shape. Also, any home, whether foreclosed upon or not, must be within eligible zones. Check the property status on the HUD website to verify it is eligible for USDA home financing.
Can USDA Loans be Used for Manufactured Homes?
You may find another lender that offers USDA mortgages for manufactured homes, but we do not offer any programs for these types of properties.
Do USDA Loans Require Inspections?
The only inspection is the appraisal itself which will provide details of the condition of the property, along with the value. It is entirely your prerogative if you want to get any other type of home inspection, such as termite inspection, but it is not required.
Do USDA Loans Include New Construction?
Yes, new construction is technically allowed, but it is a difficult loan to process. We do not offer construction loans of any type at this time. You will need to contact another local or national USDA lender if you want to finance new home construction.
Do USDA Loans Cover Mobile Homes?
Yes, but we do not offer mobile home financing with USDA loans or any type of mortgage program. You will need to speak with another lender if you want to buy a mobile home.
Can You Have a Cosigner on a USDA Loan?
Yes, cosigners are allowed. The income from the cosigning applicant must not exceed the total income allowed per household for your county. A wonderful benefit of USDA loans is that you can have a non-occupant co-borrower / cosigner on the loan. Many conventional programs will not allow this, but USDA guidelines permit a non-occupant cosigner.