USDA Guaranteed Rural Housing Program
What is a USDA Guaranteed Rural Housing Mortgage?
A USDA mortgage is guaranteed by the US Department of Agriculture. These loans have also been referred to as Rural Housing loans and were originally established to aid the increase of rural housing in the countryside. Although rural areas are thought to be in remote locations, the USDA considers many semi-urban areas to be eligible.
How a USDA Mortgage Works
USDA mortgages require the borrower pay both the upfront and monthly guarantee fee. The guarantee fee provides protection to the lender in the event of default. The upfront portion is slightly higher compared to the FHA program; however the monthly fee is considerably less. Similar to FHA, the upfront premium may be financed into the loan.
Much like the FHA program, a USDA mortgage allows for a more forgiving credit history. A bankruptcy discharged as little as three years may not hinder a borrower from qualifying for a USDA mortgage.
USDA mortgages allow borrowers to finance 100% of the property’s value. The financed guarantee may be rolled into the loan above the appraised value. Additionally, if the property appraises higher than the contract sales price, expenses such as prepaids and closing costs may be rolled into the loan.
USDA properties must fall within an eligible area. Borrowers must be within eligible income limits as set forth by USDA. Maximum loan limits are the same as conventional conforming guidelines. This program is only for single family primary residences.
This product can be used for the purchase or refinance of an existing USDA mortgage. Borrowers cannot receive cash back on a USDA refinance transaction.
Highlights of the USDA mortgage program:
- No down payment required
- No minimum borrower contribution
- Gift funds allowed to pay for borrower’s closing costs and prepaids
- No first time homebuyer restrictions
- Seller concessions allowed
- Liberal qualifying ratios
- Loan limits may be greater than FHA programs
- This program is only for single family primary residences
You will benefit from the USDA mortgage program if you
- have less up front cash to close than is required for conventional or FHA loans
- require less restrictive gift guidelines compared to conventional loans
- need the ability to roll in closing cost and prepaid expenses (as stated above)
- are looking at properties that are located within USDA eligible areas
To speak with a mortgage specialist at Homestead Funding to see if a USDA mortgage is right for you, click on the "Find A Loan Originator" button below.
Check for property eligibility: http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do
Loans provided through third party providers. Program may not be available in all areas.