What is a USDA Home Loan?
USDA loans are home loans backed the U.S. Department of Agriculture (USDA) as part of its Rural Development Guaranteed Housing Loan program. USDA loans are accessible to home purchasers with low-to-average income for their area. They offer financing with zero down payment, decreased mortgage insurance, and below-market mortgage rates. In fact, USDA mortgages are helping rural Americans buy homes who never thought it was possible.
USDA Mortgage Requirements
USDA loan entitlement is based on the buyer and the property location. The purchase home must be in a certified “rural” area, which USDA usually describes as a community with a population of less than 20,000 people. The buyer must also meet USDA monthly income restrictions. For example, purchasers can’t earn more than 15% over the local median income. The rural home must also be your primary residence. Investment properties or vacation homes are not allowed.
USDA Financial Standards
- Income eligibility — Consistent job with W-2’s and tax returns.
- Credit requirements — FICO credit score of at least 640 (may differ by mortgage company)
- Existing debt ratio — Debt-to-income ratio of 40% or less.
USDA Loan Features
Florida home buyers can finance 100 percent of a home’s purchase price while getting access to the lowest mortgage rates anywhere. This is because USDA mortgage rates are discounted as compared to other low-down payment loans.
- With a USDA loan, you have a $ZERO down payment. The VA mortgage is the only other one that allows qualified buyers no-money down.
- The USDA mortgage program only allows a fixed-rate mortgage. No adjustable-rate mortgages (ARM) are allowed.
- Rural-USDA mortgages can be used by first-time home buyers and repeat Florida home purchasers alike.
USDA Home Financing Requires Mortgage Insurance (MI)
In order to maintain this Florida home loan program, the USDA charges homeowner-paid mortgage insurance premiums.
The current USDA mortgage insurance rates are:
- For purchases — 1.00% upfront fee, based on the loan amount.
- For refinancing — 1.00% upfront fee, based on the loan amount.
- For all loans — 0.35% annual fee, based on the remaining principal balance each year.