USDA Loan
Highlights of the USDA Loan
(1) No down payment is required. In some cases, even closing costs can be financed. (2) No prepayment penalty when you pay off the loan early. (3) Typically lower interest rate than FHA and conventional.
Eligibility
Household income cannot exceed 115% of the median income in the county where your new house is located. To find the income limit for the county where you live, click here.
Borrower must be a U.S. citizen or permanent resident.
Property must be your primary residence.
Have a credit score of at least 640 for streamlined processing.
The monthly payment (principal, interest, insurance, and taxes) on the loan must be 29% or less of your monthly income.
Your monthly debt payments cannot exceed 41% of your income.
Common Questions
Are there limits on how much I can borrow?
USDA loans do not have set loan limits like FHA or VA loans. Instead, the maximum loan amount is based on the borrower’s ability to repay and the home’s appraised value.
Can USDA loans be used for home improvements?
Yes, USDA home improvement loans and grants can help homeowners repair or upgrade their homes.
What credit score is needed for a USDA loan?
While the USDA does not set a minimum credit score, most lenders require a score of at least 640 for streamlined processing. Borrowers with lower scores may still qualify but will face additional requirements.
What are the fees associated with USDA loans?
USDA loans require:
– An upfront guarantee fee of 1% of the loan amount, which can be financed into the loan.
– An annual fee of 0.35% of the loan balance, included in monthly payments.
These fees are typically lower than private mortgage insurance (PMI) costs.
Can I build a home with a USDA loan?
Yes, USDA construction-to-permanent loans allow borrowers to build a new home and finance it into a single loan.
Can I use a USDA loan to refinance an existing mortgage?
Yes, USDA loans offer refinancing options for borrowers with existing USDA loans.
Other Info
There are three types of USDA Loan Programs:
Loan Guarantees:
The USDA guarantees mortgages provided by participating local lenders, enabling borrowers to access low-interest rates without requiring a down payment.
Direct Loans:
USDA-issued direct loans are designed for low- and very low-income applicants who lack safe housing or cannot secure traditional home loans. These loans also offer terms of up to 38 years and are generally available for homes with market values below the area loan limit.
Home Improvement Loans and Grants:
Homeowners can access loans or grants through the USDA to repair or upgrade their homes. Any grant funds must be repaid if the home is sold within three years.