USDA Loans – Apply for USDA Loan Online
USDA Home Buying Loans
Easy to Qualify · Home Buying Programs for Rural Properties.
100% Financing Available · Very Low Rates · Fast Processing.
The United States Department of Agriculture has created a special home buyer opportunity for Americans that live in rural areas. These home buying programs were designed to increase homeownership amongst lower and middle income families that live in smaller sized cities, towns, and remote areas.
What makes these loans so special?
- No Down Payments – USDA loans are one of the only home mortgages that allow someone to buy a home without putting any money down. In fact, the only other way someone can finance 100% of their home purchase is if they are in the military or a veteran. Even someone with perfect credit, long job history, and plenty of savings/assets cannot qualify for zero down on a home loan. This is a unique and very special aspect of USDA home buyer loans.
- Lower Mortgage Insurance costs – Mortgage Insurance, also known as “Private Mortgage Insurance” on conventional loans is much lower on USDA loans than on FHA or conventional mortgages. This can save you a lot of money.
- Reduced Interest Rates The interest rates are lower on USDA loans, which results in lower payments, and plenty of money saved overtime.
Would You Like to Get Prequalified or Apply For a USDA Loan Now?
Click Here to Get Pre-Approved for a USDA Loan
How to Qualify for a USDA Loan
The best way to find out if you qualify for a USDA loan is to speak with one of our USDA specialists. It is easy to find out if you are eligible and usually only takes a few minutes. There are some basic qualification guidelines that the Department of Agriculture has set up which will help you have an idea if you can get a USDA loan.
- Property Eligibility – The home you want to finance with a USDA loan must be an eligible property. The property must be located in a rural area which is generally defined to have the following characteristics: (1) Open country; (2) Populations of 10,000 or less; and (3) Under certain conditions, towns and cities with populations between 10,000 and 25,000. The USDA makes the eligibility determination, which may be verified at the following link: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do.
- Job History – Similar to all other mortgage loans, a two year employment history is required. You must show that you have been consistently employed for the past two years in order to qualify for USDA financing; however in certain circumstances a small gap in employment may be permitted with a reasonable explanation. Our Loan Specialists can discuss your specific situation to see if your income is eligible. Additionally, if you have just completed schooling or military service and are newly employed but do not yet have a 2 year history, your income may also be eligible.
- Income Limits – The USDA program is intended to assist low and moderate-income households, therefore to be eligible for a USDA loan, your household income may not exceed the moderate-income limits established for the specific county in which you are financing a home. Our Loan Specialists can help you determine your eligibility, or may view the eligibility requirements on this page of the USDA website:
- DTI Ratio– One of the main criteria in determining if you will be approved or not is your debt-to-income ratio. While you must not make too much money, you also must not have too much debt. Your debt-to-income ratio is how much monthly debt you have (only those debts which show on your credit report are counted) compared to your qualifying income. So if your household income is $4,000/month, and your currently monthly debts (excluding rent), combined with your new mortgage payment are $1,500/month, this would equal a 37.5% DTI ratios (this was calculated by taking $1,500 and dividing it by $4,000). Generally your DTI ratio must be 41% or lower; however in certain cases, a DTI of up to 44% may be acceptable. Our Loan Specialists can help determine your qualifying ratio and discuss these options with you.
- Credit Score – The minimum credit score varies from lender to lender, but most want to see at least a 620 credit score for you to be approved.
- Mortgage Insurance – USDA loans have their own version of mortgage insurance. It is called the “Guaranteed Fee” and works similarly to FHA loans which have an upfront and monthly mortgage insurance premium (MIP). With USDA loans, there is a 1.00% upfront guarantee fee which may be financed on top of your loan, and a 0.35% annual guarantee fee that is divided into 12 payments each year. The amount of your annual fee (paid monthly) adjusts each year and goes down as your loan balance does. Use our USDA calculator to get an idea of what your monthly payment will be:
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 speak with get prequalified and get 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 accessor. 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 USDA mortgage payment will be based upon these numbers. 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.
What Are the USDA Programs That Exist?
The USDA has two primary loan programs that exist. This includes direct loans and guaranteed loans.
- Direct Loan – These are loans made directly by the government. You do not have to go through a mortgage lender, but instead you apply with the Department of Agriculture. The direct loan is named the USDA 502 Direct Loan.
- Guaranteed Loans – Guaranteed loans are those processed and closed by a USDA mortgage lender. This program is called the USDA 502 Guaranteed Loan. The USDA backs the loan, but does not issue the loan themselves.
The difference between these two, aside from who provides the financing, is eligibility requirements. The USDA 502 direct loan is geared more toward very low income households that may have an issue obtaining a loan from a mortgage lender. The USDA 502 guaranteed loan allows for more borrowers, including those with higher income, to get a USDA loan. Some applicants may be able to get a direct or guaranteed loan. When you speak with our Loan Specialists, they will help you identify which programs are available to you. You can then compare loan terms of any mortgage you qualify for.
How to Apply for a USDA Loan
It is very easy to apply for a USDA loan. In fact, we can prequalify you over the phone. The best way to apply is to request a free USDA loan consultation and a loan specialist will contact you. All we need for an initial pre qualification is for you to share some basic information and we can inform you of your eligibility.
Would You Like to Get Prequalified or Apply For a USDA Loan Now?
Click Here to Get Pre-Approved for a USDA Loan
USDA Mortgage Questions and Answers
Are USDA loans only for farms and agricultural properties?
This is a very common question and something that many people wonder about since it is the Department of Agriculture that backs these loans. It is actually quite the opposite however. USDA loans are meant for residential homes in rural areas, not agricultural or farmland.
Can you buy a farm with a USDA?
USDA loans are strictly for residential properties, so no farm or land that is used for agricultural purposes or farming are allowed. In simplest words, the property cannot be income producing.
If USDA loans are for rural properties does that mean they are not available near cities?
Surprisingly this is not the case either. Another misconception about the USDA home buying program is that the loans are exclusively for homes in remote areas. There are actually plenty of eligible homes just outside of various urban/suburban areas. The best way for you to get an idea of what type of home you can buy, and where, is to use the USDA property eligibility search.
Can I buy an investment property with a USDA loan?
No, you may only use a USDA loan for a home that you personally occupy as the owner. In loan terms, this is called your primary house.
Can I finance the loan costs into the loan?
Yes, you may finance the closing costs and the upfront mortgage insurance into the loan. This means that you are not required to pay the fees out of pocket at closing, but instead they may be added to the loan amount. It is important to note that you will then be paying interest on these fees if they are wrapped into the mortgage. Just some “food for thought” when you decide if that is something you want to do.
How much is mortgage insurance on USDA loans?
There are two types of mortgage insurance on USDA loans. This includes both upfront mortgage insurance and what is called the “annual fee”. The upfront amount is 1.00% of the loan amount, which is much lower than FHA and VA loans. The upfront fee may be added to the loan amount (as described in the question above). The “annual fee” is divided into your monthly payments. This fee is 0.35% of the loan balance (recalculated each year). So the amount goes down as you pay your mortgage. The annual fee of 0.35% is divided by 12 and added to the monthly payments. So for example if your loan amount is $175,000, the monthly payment of the annual fee would be $51.04 which is calculated by taking $175,000 x .35% and dividing that by 12 months. This is cheaper than FHA MIP (mortgage insurance premiums), as well as most PMI (private mortgage insurance) amounts on conventional loans.
Do I have to be a first time home buyer?
The good news is you do not have to be a first time buyer. The only stipulation is that it must be your primary residence. You may own one additional property as long as it not a USDA loan and will not be your Primary Residence upon closing the new loan. So you must not currently own a home to be able to get a USDA loan.
What is the loan limits? How much can I borrow?
USDA loan limits adhere to the Fannie Mae / Freddie Mac conforming loan limits. For a single family residence, this amount is $424,100 in most areas of the country.