What are Usda Loans?
USDA loans are mortgages backed by the U.S. Department of Agriculture as part of its Rural Development Guaranteed Housing Loan program. USDA offers financing with no down payment, reduced mortgage insurance, and below-market mortgage rates.
The USDA mortgage program is intended for home buyers with low-to-average incomes. In addition, you must buy a home in a “rural area” to qualify. Those who are eligible can use a USDA mortgage to buy a home or refinance one they already own.
Can I get a USDA loan if I already own a home?
The rural development loan can only be used for a home that you occupy. If you already own a home, you will not be able to get a USDA loan, unless you are planning to sell your home.
What properties are eligible?
USDA loans cover just about any type of dwelling that you might be interested in, from new construction and existing single-family homes to manufactured or modular homes and even condos and townhouses.
Do you need a down payment?
No. The USDA allows for 100 percent financing, which means you do not need to put anything down if you are not able or willing to do so.
What are the income requirements?
The USDA loan works a little differently than any other loan type. For this program, the less money you make, the more eligible you become for the program. This is because the government started this program in order to stimulate less fortunate areas of the country and to provide safe and sanitary housing for those that would otherwise be unable to afford it. Because of this, you must fall within 115% or less of your county’s median income. This information can be found on the USDA website so you can see if your household income qualifies for your area.
What areas qualify for USDA loans?
Properties located within designated rural areas may be USDA eligible. The USDA defines a rural area as one that is:
- Open country and not part of, or associated with an urban area
- A town, village, city or place that has a population of less than 10,000 people
- Or a town, village, city or place that is not within a highly populated metropolitan area (meaning the population must be above 10,000 but below 20,000)
Because rural areas change and grow over time, the USDA conducts reviews every five years to identify areas that no longer qualify for rural home loans. If an area is rapidly growing and in an eligible metropolitan statistical area (MSA), reviews take place every three years. The USDA has a helpful eligibility site where you can search a property by address to see if it’s USDA eligible.