A USDA Home Loan is a Government insured loan that allows borrowers to obtain 100% NO MONEY DOWN financing. It is designed to meet the needs of people living in small communities, rural areas, as well as outlying metropolitan areas. These loans are offered by private lenders such as Primary Residential Mortgage and insured by the government.
At PRMI we specialize in USDA Loans. Since we underwrite all of our loans our team of Loan Officers, seasoned Underwriters and support staff have spent years helping people make the dream of homeownership a reality with USDA Loans. We live and work in the same communities where we do business so we truly understand the needs of our customers because they are our neighbors too.
Some of the eligibility standards that determine if you qualify for a USDA loan for your home include what county and zip code the home resides in, your current income and credit history, as well as the number of dependents you can claim.
One of the most popular things people know about the USDA Loans is that it is 100% No Money Down. While that is certainly a great feature there are several other benefits and perks to this loan. The USDA Rural Development Loan also has very flexible credit requirements. In most cases borrowers are allowed to have credit scores as low as 620. They are also only required to be 2 years removed from bankruptcy and 3 years from foreclosure. USDA Home Loans do have tramline requirements. Borrowers must have at least 3 trade lines reporting on their credit with at least a 12 month history. If a person does not have this they do allow credit that's referred to as alternative trade lines. Alternative trade lines can be things such as utility bills and cell phone bills. Not only does someone have the benefit of no money down when obtaining one of the USDA Loans they can also benefit from the seller being allowed to pay up to 6% of the sales price towards the borrowers closings costs. In most cases (not always) this is more than enough to cover everything thus allowing the borrower to get into a home with no money out of pocket. USDA Home Loans are usually a cheaper loan compared to the other loan types because of the low monthly mortgage Insurance. This allows borrowers to either save money or afford more home.
USDA Rural Development loans were designed for rural areas and people who are considered low to moderate income. When searching to see if an area qualifies for USDA Loans the easiest way to do this is to look up an area on the USDA Eligibility map. Eligible areas are based on population and the last census is from 2010. This will be update as populations grow and shift.
Primary Residential Mortgage, Inc.
Some products and services may not be available in all states. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice.
The USDA Home Loan is a home loan that is backed by the government. The USDA actually guarantees the loan. Meaning when a borrower gets a loan from a private lender such as PRMI the U.S. government will guarantee the loan in case of borrower default. The government partially funds the program by collecting fees from borrowers who participate in the program. The USDA Home Loan has an upfront guarantee fee and an annual fee. The annual fee is paid monthly. While no one likes to have mortgage insurance it is necessary in order to keep the program going. Additionally the USDA Loan has a significantly lower fee compared to other loan types that require MI. The current factor used for the upfront fee is 2.75% and the annual fee is .50%. The upfront fee is actually rolled into the loan itself. So the monthly cost impact of this fee is very minimal because it is spread over the term of the loan. The annual fee has a larger impact on the borrower’s monthly payment however it is still significantly less than the monthly fee required by other loan types. For example the monthly percentage for a FHA loan is .85% which would cost a borrower much more per month.
An example of how the USDA upfront and monthly fee works is a $100,000 loan. The upfront fee is 2.75% which is $2750 in this scenario. The final loan amount would then be $102,750. The annual factor of .50% will be an added $42.50 per month to the payment.
Closing costs on any loan can vary for many reasons and the USDA Loan is no different. One is example is property location can determine the rate of taxes and insurance. When a property is considered more rural the tax rates are typically lower than what is found in the metro areas however insurance can be higher. Higher insurance rates in rural areas is often related to fire departments and response times. Volunteer fire departments are usually slower responding thus causing insurance to be higher. The good news about the USDA Loan is that the loan product allows the seller of a real estate transaction to pay up to 6% of the sales price towards the buyers closing costs. This is typically more than enough to cover all costs thus allowing the buyer to get into the home with no money out of pocket.
The USDA Rural Development Loan is a great loan type for first time home buyers. The idea of money down is extremely attractive to all buyers’ especially first time buyers. It can take a person years to save enough money to 10% or 20% down but with the USDA Loan that is not needed. A borrower can obtain a 100% loan and use their funds for other things such as moving costs and utility connection fees.
Not all mortgage lenders offer the USDA Home Loan and of those who do many do not specialize in USDA Loans. Companies like PRMI who focus a large part of their business on this specific loan type are usually better suited to help home buyers navigate the lending process. The USDA Loan is very specific in its requirement’s and it takes a seasoned lender to really understand the uniqueness of the product.