Looking for information about USDA loans? We’ve compiled a comprehensive list of frequently asked questions to help you understand this mortgage option designed for qualified rural homebuyers. Read on to find answers to your USDA loan inquiries.
What is a USDA single-family guaranteed home loan?
A USDA Loan is a mortgage program available to eligible rural homebuyers. These loans are issued by USDA-approved lenders and guaranteed by the U.S. Department of Agriculture (USDA). For a detailed overview of USDA loans, refer to our complete guide.
What does the USDA loan guarantee mean?
The USDA loan guarantee refers to the USDA’s insurance of a portion of each loan in case the borrower defaults. This guarantee provides lenders with confidence, allowing them to offer favorable rates and terms to homebuyers.
Are USDA loans only for first-time homebuyers?
No, both first-time and repeat homebuyers can utilize USDA loans.
What is the maximum loan amount for USDA loans?
There are no specific maximum loan amount restrictions for USDA loans. The maximum loan amount depends on an individual’s debts, income, and ability to repay.
How much are closing costs for a USDA Loan?
- Understanding Closing Costs Variation: Closing costs can differ based on the lender you choose and the location of the property. When considering a USDA loan, it’s essential to be aware of these potential variations.
- Utilizing Gift Funds for Closing Costs: USDA loan applicants have the option to use gift funds to cover their closing costs. To take advantage of this, make sure to obtain a gift letter from the donor and provide evidence of the funds transfer when submitting your loan application.
- Exploring Seller Concessions: Another way to address closing costs is through seller concessions. With USDA loans, sellers are allowed to provide concessions of up to 6% of the purchase price, which can be applied towards covering your closing expenses.
- Consult Your Loan Officer: For a smooth process, it’s highly recommended to consult your loan officer. They can guide you through the process of obtaining a gift letter, assist with verifying gift funds, and explain the requirements for utilizing seller concessions effectively.
What refinancing options does the USDA loan offer?
The USDA provides three refinancing options for current USDA borrowers: USDA streamline, streamline-assist, and non-streamlined refinance. Please note that the USDA does not offer a cash-back option. Learn more about USDA loan refinancing here.
Do USDA home loans require a down payment?
No, qualified borrowers can purchase a home with a USDA loan without making a down payment, saving thousands of dollars in upfront costs.
Do USDA home loans have private mortgage insurance (PMI)?
USDA loans have a one-time upfront fee called the USDA guarantee fee, which is 1% of the loan amount. Additionally, there is an annual fee of currently only 0.35% of the loan amount, which is financed into the monthly payments. Borrowers can finance the 1% guarantee fee into the total loan amount, resulting in a true $0 down loan.
What are the available terms for USDA loans?
USDA loans are only offered in a 30-year fixed-rate term.
What can I expect in terms of USDA loan rates?
USDA loan rates are often lower compared to comparable 30-year fixed-rate conventional mortgages due to the USDA guarantee.
How can I check if my home is USDA-eligible?
To determine USDA eligibility, your home must be located in an area defined as rural by the USDA. Learn more about USDA property eligibility to see if your property qualifies.
What are the eligibility requirements for USDA loans?
To qualify for a USDA loan, borrowers must demonstrate a reasonable ability and willingness to repay the mortgage. Lenders assess credit history and income to verify eligibility. Discover more about USDA credit and income requirements here.
What is the USDA’s minimum credit requirement?
The USDA does not set a minimum credit score requirement. However, to utilize the USDA’s guaranteed underwriting system (GUS), borrowers generally need a credit score of 640 or higher.
What are the employment eligibility requirements for the Home USDA loan?
For employed individuals, lenders typically require a minimum of two years of steady employment. Self-employed applicants must provide two years of federal tax returns to verify income. Retirees may qualify if they have stable income.
Can I get a USDA loan after bankruptcy?
Yes, you may be eligible for a USDA loan after bankruptcy. If you have filed for Chapter 7 bankruptcy, you can qualify for a USDA loan three years after the discharge date. For Chapter 13 bankruptcy, you may be eligible for a USDA loan one year after filing.
