USDA Mortgage Loan
Affordable mortgage loan financing options have been created by the USDA to support homeowners that have been designated as eligible. The program is designed to assist low- to moderate-income families in achieving their dream of homeownership by providing a no-down payment option.
Understanding USDA Mortgage Loans
A USDA mortgage, also known as a USDA/Rural Development Loan, is a home loan option primarily created to encourage homeownership in rural, suburban, and exurban areas. These mortgage loans come with a fixed rate and 30-year loan term and are guaranteed by the Department of Agriculture, similar to how VA home loans are backed by the Department of Veterans Affairs. Eligible individuals may qualify for a no-down payment option to make homeownership more accessible.
Features:
- USDA mortgage loan options are designed to promote homeownership in rural, suburban, and exurban areas.
- The program provides affordable homeownership opportunities to help boost prosperity and create thriving communities.
- USDA mortgage loans come with a fixed rate and 30-year loan term, and they are guaranteed by the Department of Agriculture.
- Eligible individuals may qualify for a no down payment option to make homeownership more accessible.
- USDA loans are structured as 30-year mortgages.
Frequently Asked Questions
What homes qualify for a USDA mortgage loan?
Eligibility for USDA mortgage loans is based on the property size, location, and condition of the home. The property must fall in a USDA-designated rural area, first of all. The home must also be the loan recipient’s primary residence. Loan amount limits will vary by state and county.
Who is eligible to receive a USDA mortgage loan?
Applicants must meet the USDA’s income eligibility limit, meaning the applicant cannot exceed 115% of the area’s median household income. Since area median income varies by locale, USDA home loan income limits may vary by state and even county.
The applicant must also be a U.S. citizen, a non-citizen national, or what the Department of Agriculture defines as a “qualified alien”. If you are a citizen, a permanent resident, or a qualified foreign national who will live in the home as a primary residence, you will meet this requirement.
The Department of Agriculture, which guarantees USDA mortgages, dictates that the household must show that they are able to afford the mortgage payment, including property taxes, homeowners insurance, and the annual USDA guarantee fee, which is payable in part at closing and the rest on a monthly basis, which is usually lumped in with the monthly mortgage payment.
What is the interest rate on a USDA mortgage loan in comparison to other loans? What are current USDA mortgage rates?
For information on current USDA mortgage rates, please contact your Fairway mortgage advisor. Like interest rates for other loan types, these rates fluctuate due to many different factors in the market, as well as based on the applicant’s credit background. But keep in mind, that outside of the attractiveness of a no-down payment option for qualified applicants, one of the biggest appeals of a USDA loan is that it is often offered at an interest rate lower than a Conventional loan. You can expect for that to be reflected in a slightly lower monthly payment amount. The government backing of a USDA mortgage typically means that lenders like Globus Capital advisors can offer them at competitive interest rates.
Is there mortgage insurance with a USDA mortgage loan?
Not exactly, but the USDA mortgage loan process does require payment of what is called a “guarantee fee”. This fee is paid both in part at closing and in part monthly. The upfront fee is paid as part of the applicant’s closing costs and then a smaller amount is paid each month, usually lumped in with the applicant’s monthly mortgage payment. Ask your Globus Capital advisor about specifics regarding the USDA guarantee fee. Whether the USDA guarantee fee is cheaper over the life of the loan than the private mortgage insurance associated with a Conventional loan depends on the applicant’s credit score. Typically, the lower one’s credit score, the more advantageous it would be to pay the USDA guarantee fee vs. a conventional loan’s PMI.
Can you refinance a USDA mortgage loan?
USDA home mortgage loans can be refinanced, just like any other type of home loan.
These are just a few common questions and answers about USDA loans. If you have more specific questions, it’s always best to consult with your Globus Capital advisor who can guide you through the process.
*The appraised value of the property may influence the loan amount.
**Generally, cash from equity is tax-free. However, this information should not be considered as tax or financial planning advice. Consult a tax advisor for tax-related advice and a financial planner for guidance on improving your retirement plans. Emortgage capital is not associated with any government agencies. The materials presented here are not from HUD or FHA and have not been approved by HUD or a government agency. To be eligible for a reverse mortgage, borrowers must obtain a certificate by attending counseling sessions with a HUD-approved agency. The borrower must be at least 62 years old. Loan proceeds are not considered income and will not impact Social Security or Medicare benefits. However, your monthly reverse mortgage advances may affect your eligibility for certain other programs. Consult a local program office or an attorney to determine how, or if, monthly reverse mortgage payments could affect your specific situation. At the end of the reverse mortgage loan contract term, you may no longer own some or all of the equity in the property subject to the reverse mortgage, and you might need to sell or transfer the property to repay the reverse mortgage proceeds with interest from your assets. We will charge fees for origination, mortgage insurance, closing costs, or servicing for the reverse mortgage, which we will add to the loan balance. The reverse mortgage loan balance grows over time, and interest will be charged on the outstanding loan balance. You retain the title to the property subject to the reverse mortgage until you sell or transfer it, and you are responsible for paying property taxes, insurance, and maintenance. Failure to pay these amounts may cause the reverse mortgage loan to become due immediately. Interest on a reverse mortgage is not deductible on your income tax return until you repay all or part of the loan.
Craig Kaminski
NMLS #: 1417248
licensed by:
E Mortgage Capital, Inc. d/b/a E Mortgage Capital,
NMLS# 1416824
(www.nmlsconsumeracces.org)