USDA Fully Amortizing Fixed

What is the USDA Fully Amortizing Fixed Loan?

This program helps support the American dream for low- to moderate-income families living in rural areas. Not only does the USDA Mortgage program aid qualified borrowers in obtaining a home, it also promotes financial security, fosters the growth of wealth and encourages personal financial goals, in underserved areas, which in turn helps to build prosperous communities and improve the quality of life in these areas.

A USDA home loan offers a low fixed rate and a zero money down option, making it one of the most affordable and secure loan products available. With the fixed mortgage rate, the borrower is protected from sudden and significant increases in their monthly mortgage payment should interest rates increase. With 100% financing, the borrower can obtain financing even if they don’t have ample cash reserves for a down payment.

USDA Fully Amortizing Fixed Loan Basics

  • Serve low- to moderate-income applicants
  • Purchase and refinance options
  • No down payment requirements. 100% financing
  • Interest rate is negotiated between lender and borrower
  • 30 year fixed rate term
  • Gift/grant funds and Mortgage Credit Certificates (MCC) allowed
  • 620 minimum qualifying credit score
  • Fixed monthly payments
  • One-unit homes
  • Single family home, condominium unit, PUDs, or single wide and multi wide manufactured housing
  • Home must be located in USDA-approved area
  • Primary residence only

What are the benefits?

Build Wealth

When a borrower applies for this USDA loan program, they’re often surprised to find that their mortgage payment is less than the rent they were paying before they bought their home, which can give them an opportunity to save money. They may also grow their net worth if the home appreciates in value over time.

Fixed Payments

Because these loans are Fully Amortizing Fixed loans, the borrower’s interest rate never varies as long as payments are made as agreed. Many borrowers prefer a fixed rate mortgage because it provides a sense of consistency and security; in contrast to other loans with introductory interest rates that have the potential to increase later in the term of the loan.

No Money Down

USDA rural home loans are appealing to potential homeowners with low- to moderate-income levels because they offer 100% financing options with little or no money out-of-pocket, depending on income levels.

Who is eligible for a USDA Fully Amortizing Fixed Loan?

Whether it’s a stick-built house or a multiwide manufacturered home, for dreamers looking for a place outside of the city, this loan gives eligible borrowers a chance at homeownership. Affordable, well-built housing is crucial to the strength of communities in rural America. Eligibility for these loans is based on income and varies according to the average median income for each area as well as the number of persons residing in the home. Borrowers must earn enough to qualify for the amount borrowed nut not so much that their income exceeds the limits set by the USDA.

Here are some other requirements for a USDA loan:

  • The property must be within an eligible rural development area. Generally, rural areas with a population less than 35,000. These requirements vary from state to state and county to county.
  • The borrower must agree to personally occupy the dwelling as the primary residence
  • The borrower must be a U.S citizen, U.S. non-citizen national, or a qualified alien
  • The borrower must have the legal capacity to incur the loan obligation
  • The borrower must not have been suspended or debarred from participation in federal programs
  • The borrower must demonstrate the willingness to meet credit obligations in a timely manner
  • The borrower must purchase a property that meets all program criteria

In which scenarios is the USDA Fully Amortizing Fixed Loan Useful?

This program can be the best financing option for low and moderate income borrowers without funds available for a large down payment who live in a rural part of the US. This program creates home buying opportunities where they might not otherwise exist.

USDA Refinancing

USDA home loans are very popular for purchase transactions, in large part due to the low down payment requirement. This can be an especially attractive feature for first time home buyers who don’t have equity in an existing property that can be used towards the down payment on a new home.

Buying a Home with a USDA Mortgage

USDA home loans can also be used to refinance an existing mortgage with a rate/term refinance. There are no cash-out refinances permitted. Borrowers who already have an existing USDA loan, and want to go with a new USDA mortgage, may qualify for a simplified streamline refinance option.

Other Programs to Consider

If the USDA Fully Amortizing Fixed is not an ideal fit for a particular scenario here are a few other products to explore:

  • The property must be within an eligible rural development area. Generally, rural areas with a population less than 35,000. These requirements vary from state to state and county to county.
  • To finance a home purchase and renovations to the property: FHA Standard 203(k) Loan
  • Another zero money down option: VA Loan
  • Limited documentation option for refinancing an FHA loan with a new FHA loan: FHA Streamline Refinance