Mortgage Advice

What Is a USDA Loan & How Can You Get One?

March 23, 2021

USDA loans help make owning a home more accessible and affordable for those who are living in rural and suburban areas. USDA loans are backed by the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program, but many are unaware of these types of loans and how they work. 

We’ll explain everything you need to know about USDA loans and how Ross Mortgage can help you get one. 

What is a USDA Loan?

USDA loans are low-interest mortgages with zero-down payments designed for low- and moderate income families who may not have good enough credit to qualify for traditional mortgages. For years, the USDA has helped thousands of families secure home loans and, more importantly, increase the quality of life in areas that need it the most. 

How does a USDA Loan work?

In order to be eligible for a USDA loan, you must have:

  • A credit score of 640 or higher 
  • An eligible property in a rural or suburban area
  • An average salary under the limit set by the USDA for the area you want to buy a home

Compared to other loan options, USDA mortgage rates are usually the lowest available. Interest rates on these loans can dip to as low as 1% and monthly payments on USDA loans are typically restricted to 29% or less of your monthly income, and other monthly payments can’t exceed 41% of your monthly income. Lower rates mean lower monthly payments, which is why USDA loans can be more affordable—however, eligibility for a USDA loan primarily depends on your income, location and household size, so talk to a mortgage lender to see if you apply. 

There are two things to note about what makes a USDA loan different than others—loan type and down payment amount. With USDA loans, you don’t have to make a down payment, and buyers can finance 100% of a home’s purchase price. Secondly, you’re required to take a fixed rate loan and will need mortgage insurance. 

Types of USDA Loans Available 

There are three different types of loans that are offered by the USDA:

Guaranteed USDA Loan

This loan is meant for low- to moderate-income families and is the more popular USDA loan option. USDA partners with local lenders to offer guaranteed loans. Guaranteed means USDA insures a portion of the mortgage in the event you default on your loan. To be eligible for a guaranteed USDA loan, your adjusted household income can’t exceed more than 115% of the median family income in the designated rural area you wish to live in.

Direct Loan

These mortgages are for low- and very low-income applicants. Those eligible for the USDA direct loan must make between 50-80 percent of the median income for the area, adjusted for household size; be without decent, safe and sanitary housing; and be unable to obtain a loan from other resources with terms and conditions that the borrower can be reasonably expected to meet.

USDA Home Improvement Loans

These loans help low-income Americans repair or enhance their homes. Packages can also combine a loan and a grant, providing up to $27,500 in assistance. 

How Ross Mortgage Can Help You Get a USDA Loan

If you’re thinking about applying for a USDA loan, Ross Mortgage’s knowledgeable team of specialists can walk you through the entire process, and determine whether you meet eligibility requirements. Unlike big banks and credit unions who manage multiple financial services, mortgages are our business and we know every option inside and out. 

The USDA loan program has helped thousands of our borrowers achieve the dream of homeownership, and it continues to be one of the best loan options on the market today.

Contact an agent at Ross Mortgage today and take the next step towards a perfect home for you and your family.