If you feel at home in a town surrounded by pastures, or ever asked yourself: “I’d love a zero-down option for properties in eligible areas,” here’s a home buying solution we have in-house.
Designed to promote homeownership, the USDA program allows buyers to purchase or refinance a home without a down payment while obtaining an interest rate lower than other loans.
What Is It?
USDA-backed mortgages serve these borrowers to promote rural and suburban living. The primary advantage is that the borrower doesn’t pay a monthly mortgage insurance, making the monthly payments more affordable.
What Makes It So Great?
Don’t underestimate the power of the USDA:
- There's no down payment, but if you put little or no money down, you will have to pay both an annual (0.35% of the total loan amount) and monthly service fee (1/12th of the annual fee).
- They have low-interest and mortgage insurance rates. With subsidies, interest rates can be as low as 1%.
- It's not limited to first-time home buyers: unlike other loan programs, daycare expenses and other allowable expenses may be deducted from your annual income to help keep you under the limit.
But Do I Qualify?
It might seem pretty niche, but there’s more coverage than you think:
- Income: each county has a specific income limit for USDA eligibility. Based on this USDA map of requirements, many low- to moderate-income families and individuals can qualify.
- Credit score: a FICO credit score of 600 or greater meets the minimum requirement. Those without a credit score can qualify for “non-traditional” credit references, such as rental and utility history payments. For bankruptcies or foreclosures, take about three years to build yourself up for USDA eligibility.
- Property: so “rural” can seem very, very vague. Basically, the term means not:
- within a city, town or incorporated area that has a population of greater than 20,000 residents.
- an urbanized area contiguous and adjacent to a city or town that has a population of greater than 50,000 residents.
Even if you think you’re not qualified for a USDA loan, contact your local FBHL Loan Officer (who are USDA-approved) to find out for sure.