Mortgages guaranteed and insured by the USDA
100 percent loan-to-value (LTV) ratio financing
Competitive interest rates
One of the most important functions of the United States Department of Agriculture (USDA) is to promote economic growth and stability by means of developing rural areas. To this effect, the USDA offers a number of affordable mortgage solutions to help families acquire homes in certain areas of the country.
- No money down
- Efficient underwriting, processing and approval
- Contrary to popular belief, the goal of USDA rural development is not limited to helping people purchase farmland or homes located in remote areas. The criteria of what constitutes USDA rural housing eligible for special home financing includes single-family homes located in suburban areas.
- The main requirement for USDA home loans is that the subject property must be located in a rural area. This does not mean, however, that the home has to be surrounded by farmland. Most exurban homes qualify for USDA mortgages, and some properties located just outside of major metropolitan areas may also be eligible. This program is strictly dedicated to housing; working farms will require a different type of USDA program.
- Current housing market conditions favor purchases under the USDA program; however, it is also possible to refinance existing mortgages for the purpose of getting lower rates and improved conditions. The only option not currently offered under this program is a cash-out refinance.
- Since there are no down payment requirements for USDA mortgages, borrowers have an advantage in terms of flexibility. There are no limits with regard to loan amounts, the acceptable credit score is around 640, and the debt-to-income (DTI) ratio is generally 41 percent. Borrowers whose credit scores are greater than 660 may be allowed to carry higher DTI ratios if they have a solid employment history. First-time home buyers with credit scores below 640 may still qualify under certain conditions.
- Both regular employees and self-employed borrowers can apply for USDA home financing. Interest rates and loan terms of USDA loan programs are usually better than what the big banks and even Fannie Mae and Freddie Mac may offer. Instead of private mortgage insurance, borrowers are allowed to finance upfront fees and include small amounts in their regular monthly mortgage payments.