Do your borrowers know whether they qualify for the USDA Single Family Housing Guaranteed Loan Program? It’s not uncommon for home buyers to be unaware that they are looking at properties in an area designated as rural by USDA, and that they may qualify for the 100% financing that comes with a USDA loan. This is especially the case when searching for a new home in an area that is growing, and may feel more “suburban” than “rural.”
Backed by the US Department of Agriculture, USDA loans were designed to promote home ownership among low to moderate income households in less populated areas. Adding this program to your list of options for borrowers gives you the opportunity to provide one of very few no money down mortgage options available on the market. An extremely attractive feature to many buyers, but particularly first time buyers who don’t have the equity from the sale of a previous home to use for a down payment on a new home.
- 620 minimum qualifying credit score.
- Available in a 30 year fixed term.
- Eligible properties include 1 – 2 unit primary residences (owned and occupied by the applicants and the loan security must include the same property as the original loan), Singlewide and Multi-Width Manufactured Housing, HUD/FHA, VA, Fannie Mae, or Freddie Mac approved Condominiums and PUDs.
- No down payment required – borrowers can finance up to 100% of the appraised home value or a borrower can have a gift or grant go toward the down payment with no money out of pocket.
Understanding Property and Borrower Eligibility
There are a few unique qualification features that come into play with a USDA loan. First, the property must be within an eligible rural development area. Second, because the program was created to help people with low and moderate income become homeowners, there are income limits; borrowers must earn enough to qualify for the amount borrowed but not so much that their income exceeds the limits set by the USDA. These limits vary based on the median family income in the area and the number of people in the household. For more information, both property eligibility maps and income limits can be found on www.usda.gov.
USDA mortgages can also be used to refinance an existing mortgage with a Rate/Term Refinance. There are no Cash-out Refinances permitted. If refinancing an existing USDA loan with a new USDA mortgage, a streamline option may be available.
Photography by [Maciej Maksymowicz] © 123RF.com
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