USDA loans can be highly beneficial to lower-income or lower credit buyers as it helps them achieve the dream of homeownership if they are willing to purchase homes in county or rural areas. These types of loans are not available in metropolitan areas but do offer outstanding opportunities for people wishing to purchase homes a little off the beaten path. This USDA loan FAQ is designed to help you find the answer to several frequently asked questions about these unique loans.
Are only first-time homebuyers eligible?
The USDA home loan is available to people who have owned homes before. However, these loans are solely for owner-occupied properties so you must either sell your current home if owned or provide evidence that your home is no longer suitable for your needs (i.e. too far away from your current employment, too small for your growing family, etc.).
What is the maximum amount that I can borrow?
The maximum loan amount for USDA loans varies according to the location where the property is located. For instance, homes in most of Alabama have a maximum loan value of $265,400 as of 2020 while loans in Anchorage, Alaska max out at $449,100 or have a maximum loan value of $615,000 in San Diego, CA.
How much are the closing costs for a USDA mortgage?
Closing costs are complex matters. This is the case even when taking out a USDA mortgage loan. There isn’t a unilateral one-size-fits-all amount that is taken from borrowers as closing costs. Instead, you can count on some fees and expenses to be included in your closing costs, including:
- Loan origination fees.
- Administrative and/or underwriting fees.
- Escrow fees.
- Title fees.
- Signing fees.
- County recording fees.
- Other sundry fees for things like credit reports, lender fees, appraisal costs, etc.).
The good news for borrowers is that the closing costs for USDA mortgages may be wrapped into the loan and you may ask sellers to pay part of the closing costs.
What is the USDA loan guarantee?
There are two types of USDA home loans. One is the USDA direct loan and the other is the USDA guaranteed loan. The guaranteed loan has the same minimum credit score requirement of 640 but offers higher income limits and eliminates the maximum home size limit that USDA direct loans impose.
Do USDA home loans require down payments?
USDA home loans do not require down payments. That is not to say that you cannot make down payments when purchasing USDA homes. The fact is that by providing a down payment you’re automatically building escrow in your home, reducing monthly payments, and lowering the total amount you will ultimately pay for the home. Even though down payments aren’t required, they are highly recommended.
How do I check if my home is USDA-eligible?
The United States Department of Agriculture maintains a website that offers eligibility information about properties. Simply follow the instructions outlined here (based on property type) to determine if your property may be eligible for USDA loans.
Is a USDA loan hard to get?
For those who meet the financial and credit requirements of USDA loans, they are not that hard to get on qualifying properties. People in some communities may have difficulty finding properties that meet the qualifications for a particular type of USDA loan regarding property size, location, or the condition of the home.
USDA home loans offer many potential benefits to homebuyers who do not meet the credit requirements for most conventional loans or for those who may lack the funds for a sizable down payment on a home. Do you believe the USDA loan might be the best choice for you? Contact Mid America Mortgage Loans today to learn more and see if you are eligible.