January 26, 2023
USDA loans are low-interest home loans with zero down payments designed for low-income Americans who don’t qualify for traditional mortgages. You must use a USDA loan to buy a home in a designated area that covers several rural and suburban locations.
8 things you didn’t know about the USDA home loan.
NUMBER ONE: USDA MORTGAGES CAN BE NO-MONEY-DOWN
Let’s start with number one which is USDA loans can be made with no money down.
USDA mortgages require no down payment. When you buy a house and use a USDA mortgage to finance it, you can literally close with no cash whatsoever — even your closing costs can be included.
NUMBER TWO: USDA LOANS ARE GUARANTEED
The second thing you may not know about the USDA loan is that when you get a USDA loan, the U.S. Department of Agriculture guarantees to your lender that your payments will be made. This security allows lenders to provide competitive interest rates.
NUMBER THREE: USDA LOANS ALLOW DOWN PAYMENT GIFTING
The third thing you may not know about USDA loans is that although the USDA home loan can be a no-money down program, you can put money down to lower your monthly payment, but you don’t have to come up with the down payment on your own. In fact, the down payment can come from a charitable organization, or a parent, grandparent, or another family member.
NUMBER FOUR: USDA MORTGAGES ARE FIXED-RATE ONLY
The fourth thing you may not know is that there are only two terms available for USDA mortgages — 15-year fixed-rate loans and 30-year fixed-rate loans. There are no adjustable-rate mortgages (ARM) available to home buyers through the U.S. Department of Agriculture’s loan program.
NUMBER FIVE: BUYERS CAN FINANCE $27,500 IN HOME IMPROVEMENTS WITH A USDA LOAN
The fifth thing you may not know about USDA home loans is that USDA loans allow buyers to borrow 100% of a home’s purchase price, plus another $27,500 on top of that for repairs and home improvement. Allowable repairs include replacing a roof; remodeling for accessibility of handicap persons; and, for making energy-efficiency improvements to a house.
NUMBER SIX: USDA MORTGAGES ARE EASY TO REFINANCE
The sixth thing you may not know is should mortgage rates drop in the future, homeowners with USDA home loans can refinance quickly and easily through the USDA Streamline Refinance. To get approved, you only have to show that you’ve paid your mortgage on time for the last 12 months; and, that the refinance will lower your payment by $50 per month.
NUMBER SEVEN: USDA MORTGAGES ALLOW BELOW-AVERAGE CREDIT RATING
The seventh thing that you may not know is that the USDA’s official mortgage rulebook says that home buyers must have a credit score of 640 to get approved; but it will approve home loans for buyers with credit scores below 640 on a case-by-case basis.
NUMBER EIGHT: USDA LOANS CAN BE ASSUMED BY SOMEBODY ELSE
Finally, the eighth item you may not have known about is that USDA mortgages are assumable. This means they can be passed along to future buyers of your house– with your same interest rate. Imagine 5 years from now, selling your house with its current mortgage rate intact. Your home could be easier to all because of its already-low mortgage rate.
So, if you are looking for a home in a more rural area and you meet the credit and income qualifications, you may benefit from a USDA home loan. Check with your lender to find out more details!
If there is anything we can do to help you with your home financing goals, please don’t hesitate to call.