The USDA home loan is a Government-insured mortgage that allows borrowers to obtain 100% no down payment financing. It is designed to meet the needs of people living in small communities, rural areas, as well as outlying metropolitan areas. These loans are offered by approved lenders and insured by the federal government.
USDA 502 Guaranteed Mortgage Advantages: Home Purchase
- No down payment is required, USDA is true 100% financing
- No special first-time buyer class, school, or waiting
- No down payment assistance, grants or bond money needed
- Low 30-year fix rate with NO pre-payment penalty
- 100% loan to value (LTV) plus 1.0% one-time guarantee fee through October 2023
- Borrowers can finance (roll in) closing costs with USDA if the appraisal value exceeds the purchase contract price. Or buyer’s USDA closing costs fees can be paid by the home seller (up to 6%)
- Very low mortgage insurance, PMI costs
- No cash contribution is required from the borrower
- No maximum purchase price or loan amount limit – buyers qualify based on their debt to income
- No cash saving or reserve requirement
- Competitive 30-year fixed interest rates (set by underwriting USDA lenders/banks/brokers)
- Backed by the U.S. Government
- Any existing single-family home, townhome, or condo is in good repair regardless of the home seller. The home is just required to be located in a USDA-approved eligible area. NOTE: Rehab homes, mobile & manufactured homes, land and lot loans are not eligible. In addition, building a home on your own lot is not permitted. However, new construction being sold by a home builder is allowed assuming the new home is located in a USDA-eligible area.
USDA Pilot Streamline Assist Refinance Program
The United States Department of Agriculture (USDA) Rural Development (RD) is now offering the opportunity for current USDA Section 502 Guaranteed borrowers in select states to refinance their existing USDA loans through the USDA Streamline Assist program. The Rural Refinance program allows USDA homeowners to take advantage of low-interest rates with reduced documentation requirements.
We are proud to support this program introduced by Rural Housing, and we are pleased to assist current USDA Section 502 Guaranteed homeowners in taking advantage of current refinance opportunities. The USDA Streamline Assist Refinance loan does not require a new appraisal or any additional property inspections. However, borrowers must be current (no late payments) on their existing mortgage for the previous 12 months.
Requirements of the USDA Streamline-Assist Refinance program include:
- The borrower must currently have a USDA mortgage to be eligible for the USDA refinance – very important. There are different refinance relief programs for homeowners with Conventional, VA or FHA loan, please contact us below if you have another loan type.
- No mortgage late payments in the last 12 months.
- The home must be your current primary residence.
- Mobile or Manufactured homes are not permitted.
- The new term of the refinance must be 30 year fixed mortgage.
- The upfront USDA guarantee fee will be 1.0% which will be added to the new loan balance
- The applicable USDA monthly fee (PMI) on both purchase and refinance loans will be 0.35%
- All buyers closing costs and escrows CAN be included or rolled into the new loan, no out of pocket costs to the borrower!
- No cash out is permitted with the USDA refinance program, only a reduction of interest rate
- Income verification for all adult household members is required for USDA income eligibility only, not for determining repayment ability. Please see the current 2023 USDA income calculator here. Buyers want to ensure their household income is below the Section 502 Guaranteed Rural Housing Loan Program posted limit.
- Borrowers must be employed at the time of closing on the refinance transaction or have alternate sources of income, such as retirement income, social security income, disability income, alimony, or child support. Debt to income ratios will not be considered for the refinance program, only the purchase program.
- The loan to value (LTV) cap is unlimited, negative equity is ok. It does not matter how much you owe on your home loan as a new appraisal will not be required.
Rural Development Designated Rural Area:
All homes must be located in rural eligible areas to be approved for the USDA purchase program. This does NOT apply to homeowners that already have a USDA loan and want to refinance. These properties are “grandfathered” in regardless of future USDA map changes.
Many home buyers are surprised to learn exactly what is still considered “Rural” Many popular locations just minutes outside of busy metro locations are still approved for USDA Rural Financing! Not sure about your location, or what to learn more? Please submit the Request Contact form at the top of your screen, or call ph: 888-705-1975.