USDA Rural Development Loans

Basic USDA Loan Requirements

USDA Income Limits: 

All USDA loans in MN, WI, IA, ND, SD, CO, and FL have household income limits to qualify. The loan is a "means tested" program, which states that you or your family can't make too much money. There are allowable income adjustments for minor children (family size), child care expenses, and elderly family members. Most moderate to middle income families WILL qualify. You can easily check income limits for your family size, state, and county on the USDA Loan income eligibility web site.

USDA Rural Areas Only:

Basically, a rural area for the USDA loan is anything outside a major metropolitan area. This may be closer to the big city than you think, so be sure to check the property eligibility map to make sure the area you wish to buy a home fits USDA's property location guidelines.

No Down Payment Required:

Unlike conventional loans and even FHA loans, USDA Home Loans do not require any down payment (you can put money down if you want). This is especially beneficial for first time home buyers. Saving up a down payment can be very difficult. Utilizing a USDA Home Loan means that is no longer an issue.

House Price Limit: 

The maximum purchase price of the house you can buy with a USDA loan will vary by the State and County the property you wish to buy is located. As this is ever changing, please contact us at (651) 552-3681, click here to quickly send us a question, or just click the Chat icon in the bottom corner (if available) and we'll look up the current information for you.

Type of Home: 

The home must be on a publicly maintained road, or in a development with private roads. It must be a single family home (no duplexes), must be owner occupied (no investment homes), and may not produce income.

No Business can Operate on the Property. 

A hobby farm is OK, but agricultural land that is getting farm income (even from renting part of the land), or any property that will be farmed is not OK. Properties that have a significant number of building other than the home itself, such as pole sheds, old barns, and old silo's can be an issue with the USDA Loan, so be sure to contact us to discuss any questionable properties BEFORE signing a purchase agreement.

USDA Loan Closing Costs: 

All mortgage loans have closing costs. Lender fees, appraisal, credit report, title company, state taxes, origination fees, and more. These are the buyer costs that need to be paid at closing. The best way is always for the buyer to pay cash.  But as most first time home buyers have limited funds, so this can be a problem.

You are also allowed with a USDA loan to roll the closing costs into the loan with "seller paid closing costs", also known as seller concessions. Or you can pay them by taking a slightly higher interest rate. Under these two options, you are still paying for the closing costs, but you are essentially paying over time versus cash out of pocket today. How cool is that?

Sellers Concession:

A sellers concession allows the seller to pay for some (or all) of your closing costs out of their proceeds from the sale of the home. Couple that with 100% financing that is available, and many people can be in a home without any of your own money,* meaning you can keep your money in savings to cover any expenses that arise.

Financed Closing Costs:

On some purchase transactions, foreclosures and short sales in particular, a sellers concession is not possible. A USDA Home Loan allows the financing of the closing costs even if the seller will not agree to a sellers concession. All of the closing costs (except discount points) can be financed, up to 100% of the appraised value of the home. This is extremely beneficial when a sellers concession is not an option, but is hard to depend on, because we don't know if it is available until AFTER the appraisal is completed.

The next "financed" option is by taking a higher interest rate.  For example, if you take the current interest rate and increase it about 1/2%, the lender can eliminate most, if not all your closing costs.

USDA Loan Interest Rates:

USDA Rural Development Loan Interest Rates generally run about 1/8th to 1/4% lower than conventional mortgage loan interest rates, adding to the benefit of using a USDA loan to buy your home. As with all mortgage loans, the USDA loan interest rates can and do change on a regular basis.

USDA loan interest rates, just like all mortgage programs will vary for each individual person based on your unique situation, credit score, etc.  Complete our free, no obligation Quick Qualifier form, to get a personalized Loan Estimate sent directly to you based on your exact situation. 

 Better yet, complete a full USDA Loan Application, and let one of our licensed USDA loan Experts review your full application to determine qualifications, and what your actual interest rate may be.