USDA LOAN PROGRAM

USDA LOAN PROGRAM

USDA – United States Department of Agriculture – Loans

A lot of mortgage companies have these type of loans backed by the government and

secured by the United States Department of Agriculture. This is not a first-time homebuyer

program. Anyone who qualifies can use these type of loans as long as you do not currently

own a house. Therefore, this would not be a loan program that you could use to purchase

rental, investment, vacation, or a second home. It is a loan program for purchasing a

primary residence.

The reason for the USDA program is to give people opportunity to purchase homes outside

of major city limits in rural areas. You can be 30 miles outside a major city and purchase

with USDA loan program.

Minimum Requirements:

- USDA Approved lender to process the loan

- Minimum credit score of 620

- Minimum 2yrs on the job

- Debt-to-income ratio – what you have coming in versus what is being paid out.

- PMI – Private Mortgage Insurance – Requirement*

*PMI REQUIREMENT: PMI – Private Mortgage Insurance – is an insurance policy that lenders put on you because you don’t pay 20% down. This policy is for the lender in case you default on the loan, but the lender passes the payment to you (the borrower) and you pay

the premium each month. It is not crazy expensive, however with USDA or FHA your PMI

never comes off the mortgage during the term of the loan. The only loan PMI can be

removed from is Conventional. Therefore, when purchasing USDA and after you have 20%

equity built up, you can refinance through a conventional loan to get rid of your monthly

PMI premium if the math makes sense with loan rate – mortgage %.

Things to Consider:

- You can negotiate seller to pay your closing which is typically anywhere from 3.5 –

4% of the Purchase Price. This will help with buyer out-of-pocket costs at closing.

- You can purchase a home with a little a little land (5-6 acres) and use as little as

$1,000 out of pocket: $500 in earnest money as a good faith deposit + $500 for

home inspection – ALWAYS get the home inspected