Affordable Homeownership with USDA Rural Development Mortgages
Understanding different types of mortgage loans helps you choose the right loan for your unique circumstances. Buying a home and getting a mortgage involves considerable cost. Some people yearn to own a home, but don't think they can afford to. Qualifying for a mortgage may be easier than you think, especially if you get a mortgage with no down payment.
A USDA rural development mortgage is a unique type of loan specifically for buyers in rural areas. It's one of the most affordable home loan programs today. Yet, some people think they're not eligible because they assume their area is too developed. But the USDA's definition of rural isn’t determined by whether an area is characteristic of a countryside. It’s based on population. So even if you’re buying a home in a suburban area, the location might be considered rural by USDA standards.
No Money Down USDA Home Loan
This loan is an affordable option because it requires zero down. There’s also the option of rolling closing costs into your mortgage loan, which reduces your out-of-pocket expense. USDA home loans also allow sellers to contribute up to 3% of a borrower’s closing costs.
Cheap Mortgage Insurance
USDA home loans do include mortgage insurance, which is required on all mortgage loans with less than 20% down. There's a partially-funded upfront mortgage insurance premium paid at closing of 1.00%. This can be rolled into the loan balance. You’ll pay an annual mortgage insurance premium of 0.35%, which is included in your mortgage payment.
This premium is cheaper than mortgage insurance with other programs. FHA's annual mortgage insurance premium is 0.85%, whereas annual mortgage insurance premiums with a conventional loan can be as high as 1.00%.
Unfortunately, even if you live in a qualified rural area, USDA home loans have income limits. These loans are available to borrowers with low to moderate income. The income limit varies by location, but it’s generous and allows many families to benefit from the program. For example, a family of four living in Tucson, AZ may qualify with an annual income up to $53,800. A family of four in San Francisco may be eligible with an annual income up to $146,200.
A USDA-backed home loan is affordable and can help you purchase a property sooner. Speak with one of our mortgage experts to see if you’re eligible for this program.