Are You Ready for the Country?
Or a small town, or even a suburb? The amazing USDA loan with 100% financing makes that move possible.
Let’s get one thing clear from the start. USDA does not stand for United States Dairy Association. It stands for United States Department of Agriculture. Its history stretches all the way back to 1862, when Abraham Lincoln signed legislation creating the agency. But what, you may ask, does a department dealing with farms, forests, and food have to do with home loans? Plenty.
The part of the agency concerned with home loans is USDA Rural Development, and the name says it all. They are charged with improving the economy and quality of life in rural America, and that includes helping people buy homes. The focus is on providing decent housing to low- and moderate-income households.
One of the most attractive things about this loan is the prospect of 100% financing. No down payment requirement is a huge advantage, especially if you are buying your first home. But it’s not the only great feature. Here’s a more complete list:
- Your interest rate is fixed, keeping your monthly principal and interest payment consistent throughout the 30-year loan term.
- Closing costs can be paid by the seller or included in the loan.
- You don’t have to be a first-time homebuyer.
- There’s no maximum purchase price, but income eligibility requirements apply.
- Fees are lower than FHA loans.
- There’s no set acreage limit.
What can I do with a USDA loan?
The possibilities are (almost) endless. You can use a USDA loan to:
- Or even relocate a home!
You can pay for site preparation costs, such as grading, fences, driveways, and trees. You can also pay for major appliances, wall-to-wall carpeting, and HVAC equipment, but these items must stay with the house if you decide to sell.
Yes, there are requirements
As you might expect when a loan program offers such generous terms, there are restrictions and requirements. Both you, and the home, must qualify for the loan.
- The home must be your primary residence.
- The only loan type is a 30-year fixed-rate.
- There is a loan guarantee fee due at closing and an annual fee due as long as the loan-to-value is over 80%. (Fees are a percentage of the loan amount and are set annually by the USDA.)
- May have an income of up to 115% of the median income for an area.
- Must meet the income restrictions for the county where the home is located.
- Must be without adequate housing but be able to afford the mortgage payments, including insurance and taxes.
- Must have a reasonable credit history.
- Existing homes
- New construction
- Modular homes
- New manufactured homes
- Homes in a planned unit development (PUD)
But I don’t want to live on a farm!
There’s a common belief that USDA loans are only for people who want to live way out in the country. It’s true the home must be in an eligible rural area, but you may be surprised to see all the places you could live. You can search the USDA map by address or simply look at different parts of the country. Many small towns and even suburban areas are eligible.
Can I refinance a USDA loan?
If you have a USDA loan now, you can refinance with USDA (you can’t refinance a different type of loan to a USDA loan). You may be able to refinance without a new appraisal. The new loan must have a lower interest rate than the current loan, and you cannot take cash out with this refinance. Depending on your current situation, you may want to discuss different types of refinances with your loan originator.
Could a USDA make homeownership possible for you? Your licensed CrossCountry Mortgage loan officer is here to answer your questions and help you get started. Call or email today!