USDA Loans: Answers to Frequently Asked Questions

by SalCal Real Estate Connections 12/23/2018

The US government has been helping Americans achieve their goal of homeownership for decades. Through programs offered by the Federal Housing Authority, the USDA, and the Department of Veterans Affairs, millions of Americans have been able to afford a home who would have otherwise struggled.

The focus of today’s post is one such service: loans offered through the USDA Rural Development program.

If you’re hoping to buy a home in the near future but are worried about being able to save up enough for a down payment or build your credit score in time, USDA loans could be a viable option.

Let’s take a look at some of the common questions people have about USDA loans:

Do I have to live in the middle of nowhere to get a USDA loan?

The short answer is “no.” rural development loan eligibility for your area is laid out on a map provided by the USDA. Most of the suburbs outside of major cities, as well as nearly all rural areas, are covered by the rural development program.

Can I qualify for a USDA loan if I’ve previously owned a home?

Yes. You may be eligible for a loan as long as you’re not the current owner of a home that was purchased through the rural development program. So, for example, if you own a home financed through the USDA and wanted to buy a second home and rent out the first one, you wouldn’t be able to finance your second home through the USDA.

How does the USDA loan guarantee work?

When you buy a home, a lender asks you to make a down payment. If you don’t have a down payment, the government (USDA, VA, or FHA) insures the down payment on your home rather than you paying it up front.

Will I have to pay mortgage insurance?

Unlike other subsidized loans, rural development loans require a “guarantee fee” rather than PMI (private mortgage insurance). The guarantee fee is 1% the total mortgage amount and this can typically be financed into the loan (so you don’t have to pay up front). In addition to the guarantee fee, USDA loans also charge an annual premium for the lifetime of a loan.

What are the qualifications for a USDA loan?

To find full eligibility information, complete the survey on the USDA’s eligibility website to find out if you qualify. However, the general qualifications are:

  • U.S. citizenship

  • Buying a home in a qualifying area

  • 24 months of income history

  • A credit score of 640 or higher for streamlined processing

  • Income high enough so that your monthly payments do not exceed 29% of your monthly earnings

What is the direct loan program?

The USDA really offers multiple urban development loans. The guarantee program, for which most single families utilize, and the direct loan program. Direct loans are designed for families who have the greatest need. You can also find out if you’re eligible for a direct loan by filling out the questionnaire on their website.



About the Author
Author

SalCal Real Estate Connections

SEARCHING FOR A NEW HOME? Welcome to SalCal Real Estate Connections premier real estate website, serving Connecticut. Are you thinking of buying a home? Finding the right home can be a difficult process but no matter what you are looking for as an experienced Connecticut real estate agent I can provide you with the resources you need to make the home buying process simpler, from specific neighborhood information to tools to estimate your mortgage payments and buyer resources and articles that will help you through the home buying process. Thinking about selling real estate? No matter which market you're in, you can use the marketing programs and experience of a qualified real estate agent like me to help sell your home quickly and at the right price. Learn more about my service, see information about recent home sales, or contact me to get started today!Are you interested in more details? Please take a minute and browse my local neighborhood and school details, real estate mortgage information and interactive maps for the market. Thank you for visiting SalCal.com! This is a one-stop real estate website for all your home buying and selling needs. I’m a professional real estate agent who will help make your search for a new home an enjoyable experience. I encourage you to check out my website for local neighborhood and school details, mortgage information, interactive maps, listings of properties of homes for sale, plus many more features. Please feel free to contact me directly if you have any questions about the real estate market, or buying or selling a home.Thank you!