USDA-Rural Home Loan Guidelines: Updated For Fall 2012
The USDA program has changed. Effective October 1, 2012 it will no longer be subsidized by the US Taxpayer.
Effective October 1, 2012, USDA mortgage insurance rates are:
For purchases, 2.00% upfront fee paid at closing, based on the loan size.
For refinances, 2.00% upfront fee paid at closing, based on the loan size.
For all loans, 0.40% annual fee, based on the remaining principal balance.
A $100,000 loan would require a $2,000 mortgage insurance payment at closing, and $33.33 of mortgage insurance paid monthly.
Make sure to talk to your lender about the changes.
Summarizing The USDA / Rural Housing Mortgage Program
The USDA loan guidelines are straight-forward. You must qualify for the program and your home must, too.
Q-How do I check if my home is USDA / Rural Housing-eligible?
A-With the USDA Rural Housing Program, your home must be located in a rural area. This is based on the most recent US Census. Follow this link to check a home’s eligibility;
Q-What is the USDA program’s minimum down payment?
A-The USDA has no down payment requirement. You can finance 100% with a USDA loan.
Q-Is the USDA loan program limited to first-time buyers?
A-No, the USDA Rural Housing Program can be used by first-time buyers and repeat buyers.
Q-Can I finance the Upfront Mortgage Insurance into my mortgage?
A-Yes, the USDA will let you finance your Upfront Mortgage Insurance payment into your loan size. For example, if you bought a home for $100,000 and borrowed the full $100,000 from your lender, your Upfront Mortgage Insurance would be $2,000. You could then raise your loan size to $102,000.
Q-My lender doesn’t offer USDA mortgages. What do I do?
A-The USDA website maintains a list of lenders in the Rural Housing Program.
Q-What mortgage products are available with a USDA mortgage?
A-The USDA / Rural Housing Program offers 30-year fixed rate mortgages only. There is no 15-year fixed rate mortgage.
Q-How much are the closing costs for a USDA mortgage?
A-Closing costs vary by lender and location. For example, some lenders have high origination charges. Others do not.
Q-Can I get a gift for my closing costs?
A-Yes, USDA loans allow gifts from family members and non-family members. You will need a gift letter to accompany your loan application.
Q-I negotiated to have the seller pay my closing costs. Is that allowed?
A-Yes, the USDA Rural Housing Program allows sellers to pay closing costs for buyers. These costs can include state and local government fees, lender costs, title charges, and any number of home and pest inspections.
Q-Can I use the USDA loan program for a vacation home or investment?
A-No, the USDA Rural Housing Program is for primary residences only.
Q-Is there a minimum credit score for the USDA loan program?
A-There is no minimum score, but 640 is generally regarded as a cutoff point.
Q-I recently went back to work. How long until I am USDA-eligible?
A-If you are a W-2 employee, you are eligible for USDA financing immediately; you don’t need a job history. If you have less than 2 years in a job, however, you may not be able to use your bonus income for qualification purposes.
Q-I am self-employed. Can I use the USDA loan program?
A-Yes, self-employed persons can use the USDA Rural Housing Program. If you are self-employed and want to use USDA financing, as with FHA and conventional financing, you will be asked to provide 2 years of federal tax returns to verify your self-employment income.
Q-Are USDA mortgage rates good?
A-Yes, USDA Rural Housing Program mortgage rates are often as low as comparable conventional 30-year fixed mortgage rates. Hat Tip: Dan Green.