The USDA loan from PrimeLending is also known as the USDA Rural Development Guaranteed Housing Loan Program. Like the FHA, VA and other government-backed loans, it’s guaranteed by the U.S. Department of Agriculture. It was originally designed to provide a mortgage alternative to rural property buyers who had limited financing options. Today, as populations grow and suburbs expand, it’s not just a loan for farmers and rural property owners. It’s becoming a viable mortgage option for people who want to live away from cities and enjoy country living.
Understanding USDA
Who qualifies for a USDA home loan? What land is eligible? How much savings can home buyers enjoy? Get your USDA questions answered by watching this quick, informative video about USDA mortgage financing.
USDA home loan eligibility
In order to be considered eligible for a USDA home loan, borrowers must meet specific guidelines.
Eligible Geographic Areas: To get a USDA home loan, the property you buy must be in a USDA designated rural area, but it’s not all farmland. Almost 97% of the U.S. is eligible, which includes small towns and suburbs. The USDA Mortgage eligible area requirement map(link opens in a new tab) will show you all the areas where you can use this loan.
Income limits: The USDA loan was originally designed for low to moderate income earners. The program’s guidelines define income level as being up to 115% of the area’s median income. In many parts of the country, this can be quite generous. For lower income buyers, a household’s entire income is considered during the application process, which helps increase eligibility. This can include income from a child or other family member living in the house but who isn’t listed on the loan application.
USDA home loans differ based on the kind of loan you’re interested in, but they all have the same eligibility requirements.
USDA home loan eligibility
- U.S. citizenship or permanent residency
- A monthly payment that’s 29% or less of your monthly income
- Dependable income, usually for a minimum of 24 months
- Good credit history. Applicants with a score of 640 or higher shouldn’t have any issues
That said, USDA loans are set up to make it easier for borrowers with a lack of credit history or down payment to qualify for financing.
USDA home loan benefits
USDA home loans have several advantages over other mortgage options, primarily because the USDA can guarantee all loans against default, which means lenders have the freedom to take on more risks and offer better terms to potential homebuyers. Other benefits include:
No down payment:
The USDA loan comes with 100% financing. You don’t need to make a down payment, which can often be a big obstacle for first-time homebuyers.
Very low interest rates:
Because the loan is guaranteed, PrimeLending offers a lower standard interest rate that is not tied to your credit score or down payment.
Low monthly private mortgage insurance:
As of 2019, the upfront mortgage insurance rate on a USDA loan is just 1%, with an annual fee of only 0.35%, the lowest numbers of virtually any mortgage financing program. The upfront fee can also be rolled into the loan, eliminating an out-of-pocket expense at closing.
Flexible credit requirements:
Borrowers with lower credit scores or less than perfect credit history can often meet the program’s qualifying guidelines.
Length of the loan:
The PrimeLending USDA loan is a 30-year fixed rate loan. It’s one of the most common types of mortgage, with low and affordable monthly payments.