What is a USDA home loan?
In 1991, the US Department of Agriculture (USDA) started a rural development loan program for homebuyers. USDA continues to offer this program to encourage growth in qualified rural and suburban parts of the country by making home buying affordable and achievable.
USDA loans have a maximum household income limit applied for loan approval that is set for people on a budget who plan on living in rural areas.
Only HUD approved lenders may offer this type of loan.
What are the benefits of a USDA Loan?
- No money down
- Low interest rates; USDA rates are often times lower than other loan products.
- 30 year and 15 year fixed rate mortgages available
- Ability to finance closing costs into the loan; finance up to 100% of property value
- Government insured / guaranteed
- Lenient credit guidelines
- Owner occupied properties only
- No pre-payment penalties
- Can be used by first-time home buyers and repeat home buyers alike
Do you pay mortgage insurance with a USDA Loan?
Mortgage insurance is required on all USDA loans. Mortgage insurance protects the lender against losses that they would normally take in the event your home goes into foreclosure. There are two types of mortgage insurance that you must pay with an USDA loan, up-front mortgage insurance and monthly mortgage insurance.
- 2% upfront mortgage insurance
- Monthly insurance based on .40% annual premium, divided by 12. This total is added to the monthly payment and decreases slightly each month as your loan amount goes down. Monthly mortgage insurance is now required to remain on the loan, for the entire life of the loan.
Are you ready to move forward with a purchase or refinance? Please give us a call at 888-810-1459 and let us help you secure financing for the purchase of a new home or save you money on the refinance of your existing home. Be sure to ask your loan officer about our closing costs incentives and our low rate guarantee!
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Disclaimer: The information contained in this article has been prepared by an independent third party and is distributed to consumers for educational purposes only. The information is considered reliable but not guaranteed to be accurate. The opinions expressed in this article do not represent the opinions of Finance of America. Please consult with a licensed loan officer for expert advice regarding financing or refinancing a home.