If you’re buying a home in a rural community, you could qualify for a no-money down financing program through the Rural Housing Service (RHS), an agency of the U.S. Department of Agriculture (USDA). USDA loans offer flexible downpayment funding options, making home ownership affordable for many rural dwellers.
USDA Loans are especially attractive to…
- First-time homebuyers or borrowers with limited funds for downpayment and closing costs
- Low- to moderate-income buyers
No downpayment requirement
Qualified borrowers may be able to finance up to 100% of the purchase price with no downpayment required on certain loan products.
Favorable loan terms
A USDA loan is available as a fixed rate loan so the payments stay the same throughout the life of the loan.
No prepayment penalties
Pay off the loan in full whenever you're ready, or make bigger monthly payments to pay down the balance sooner without incurring any fees or penalties.
Get an idea of what your monthly mortgage payment may be, including costs associated with your mortgage such as property taxes, homeowners insurance, and Private Mortgage Insurance (PMI), if applicable.
Recalculate your new house payment based on loan amounts, interest rates, and other factors, to see if refinancing your mortgage is a smart financial move.
Calculate how much house you can afford. Get an estimate for a mortgage amount that may fit comfortably within your budget.
Frequently Asked Questions
A USDA Guaranteed Loan is a government-backed loan where the USDA guarantees the loan when you work with an approved lender. Contact an FOA advisor for details about USDA loan programs.
The primary residence must be located in an eligible rural area. Contact your FOA advisor to determine if your property address falls into an USDA eligible area.
USDA loans are for homeowners who will use the property as their primary residence. You can purchase a condo, manufactured home, single family residence, or planned unit development with a USDA loan as long as it is located in a USDA eligible area.
There is no maximum loan amount, but the amount you can borrow depends on the value of the home, your monthly income, and your debt to income ratio. In most cases, the maximum loan amount is 100% of the appraised value of the home.
Your mortgage insurance premium is less than what you would pay for a conventional loan or FHA loan. It’s comprised of an upfront gauranteed fee of 1% of your loan amount and a annual fee 0.35% of your loan amount.
Closing costs vary by loan and borrower, but the seller might agree to pay closing costs. If the home appraises for higher than the purchase price, closing costs can be financed into the loan as long as the total loan amount doesn’t exceed the appraised value. In these cases, you won’t have to put any money down at closing.
Borrowers must meet certain income guidelines to qualify for their loan. While the USDA loan program is designed for low-income families, you still need to qualify with the right debt ratio. Household income requirements range between 50 to 115% of the average income for the area, depending on the loan program.
To speak with an experienced mortgage advisor, contact an FOA advisor to get the loan application process started.
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