USDA Loans, once knows as the Farm Home Loan. The USDA loan is my personal favorite and one of the best loan programs around -- I wish more people would take advantage of it! This is a 30 year fixed rate only program, which finances 100% of your purchase price. NO Down payment is required. The USDA loan guidelines are pretty straight-forward. You must qualify for the program and your home must, too. Primary residences only - and no "non occupying" co-borrowers or co-signors.
To be eligible for a USDA loan, your home must be located in a rural area. However, the USDA's definition of "rural" is quite liberal, and allows for population bases of up to 25,000 people. Many small towns meet the USDA requirements, as do suburbs and exurbs of many major U.S. cities.
USDA is NOT a first time buyer program, it can be used by first-time buyers and repeat buyers, however you may only own ONE home.
The USDA / Rural Housing loan is a 30-year fixed rate mortgage only. There is no 15-year fixed rate mortgage and no adjustable-rate mortgages. 30-year fixed only.
Gifts are allowed for closing costs, and yes, the USDA Rural Housing Program allows sellers to pay closing costs for buyers. These costs can include state and local government fees, lender costs, title charges, and any number of home and pest inspections.
Credit score minimums are generally 640 and if you are a W-2 employee, you are eligible for USDA financing immediately; you don't need a job history. If you have less than 2 years in a job, however, you may not be able to use any bonus or overtime income for qualification purposes.
Self-employed borrowers will be asked to provide 2 years of federal tax returns to verify self-employment income.
The Rural Housing Program is now entirely self-funded. Formerly, it was taxpayer-subsidized. As a result, USDA has changed how it charges its borrowers for mortgage insurance.
Effective October 1, 2016, USDA mortgage insurance rates and upfront fees have improved dramatically:
· For purchases - 1% upfront fee based on the loan size is paid at closing and can be financed into the mortgage. (Formerly 2.75% upfront fee) · For refinances - 1% upfront fee based on the loan size is paid at closing and can be financed into the mortgage. (Formerly 2.75% upfront fee) · For all loans - 0.35% annual fee, based on the remaining principal balance, paid monthly with your payment. (Formerly 0.50% annual fee)
USDA allows you to finance the upfront fee into the mortgage, so for example, a $100,000 loan amount would require a $1,000 upfront fee paid at closing (which is added to the loan amount, similar to an FHA loan) so your total loan amount would be $101,000 and $29.16 would be paid monthly to cover the "annual fee" which is mortgage insurance.
USDA Rural Housing Program mortgage rates are often lower than comparable conventional 30-year fixed mortgage rates. And because mortgage insurance rates are lower, with no down payment, USDA loans can often be a better deal than FHA or conventional financing. Only one county in California is completely ineligible and that is San Francisco, but all properties in the following counties are eligible under USDA's definition.
For information on properties in the counties other than those listed above, please call me for eligibility. You might be surprised at the small cities that are eligible like Galt, Lathrop, Patterson, Riverbank, Rancho Murietta, Auburn, Half Moon Bay and many more!!
USDA Loans are made to buyers of owner occupied primary residences only. Second homes and investment properties do not qualify. They are designed for moderate to low income families but the income limits are pretty generous as you can see by the table below.
Below are the income limits for our affected Counties --
