USDA Loans
Definition of USDA Mortgages:
Commonly known as a Rural Development (RD) Loan. The United States Department of Agriculture (USDA) in 1991 was tasked to make homeownership easier within rural and suburban areas. As a part of the government they are similar to FHA and VA loans where they are guaranteed by the government. These types of loans were designed to improve the economy and the quality of life in rural America.
Qualifications –
The Starbuck Rule of Thumb – if you the home you’re interested in is within 5 miles away from a Starbucks the property is most likely not eligible for a USDA loan. A USDA loan has area limits and it can only be applied to homes in rural or suburban areas. If you want to check your address please follow this link – “Area Eligibility”
Income Limits – Since a USDA loan us meant to stimulate urban and suburban America they are also require that you don’t make too much money. The income limits vary by location and depend on the house hold side. You can check the income limit by going to this link – “Income Limits”
Along with FHA and VA (Government Loans) there is also a loan limit of $548,250 for 2021. This means you can’t buy a home more than $548,250, unless you plan on putting a down payment to get under the loan limit. The home is also subject to Government code requirements that are more restrictive than a Conventional mortgage.
You have to have at least a 620 credit score and you cannot have a debt that went into collections in the last 12 months. Underwriting becomes less restrictive if you have a 640+ credit score.
Direct Loans –
The USDA also offers Direct to consumer loans that aren’t technically guaranteed through USDA, but the USDA still manages the loan. These loans are for a lower income tier borrower, but can have much more attractive interest rates compared to a guaranteed loan.
Guarantee Fee –
In order to utilize USDA Financing you will expect to pay a guarantee fee upfront and an annual basis. This fee is comparative to Mortgage Insurance with other financing types. You will expect to pay a 1% upfront fee that can be rolled into the financing. On top of that there is an annual fee of .35% of the remaining loan balance that is collected each September.
Have Questions?
Read our other blog posts or reach out to us directly.
Benson Ringle
Loan Officer NMLS #1516626
GA Lic. # 1516626
(218) 507-0429
Benson.Ringle@supremelending.com
