How USDA Loans Work

USDA loans, also known as rural development loans, are backed by the U.S. Department of Agriculture and provide affordable mortgage options for homes in rural areas than other loans do.

If you’re buying a home, you can get a USDA loan as a 30-year fixed-rate mortgage. If you already have a USDA loan, you can refinance it into a new USDA loan; however, you can’t refinance with a USDA loan if you currently have a different loan type.

USDA Loan Eligibility Requirements:

  • No down payment
  • Your credit score must be at least 640.
  • Your debt-to-income ratio (DTI) must be 43% or lower.
  • The property must be in an eligible rural area. Find out if your property is eligible.
  • The property must not be a working farm.
  • Your household income, which includes everyone in the home, must not exceed 115% of the area median family income. Check your income eligibility with the USDA.

Understanding the USDA Guarantee Fee

USDA loans require an upfront guarantee fee and an annual guarantee fee, similar to upfront mortgage insurance and monthly mortgage insurance for FHA loans. These guarantee fees are generally lower than mortgage insurance premiums for FHA and may save you money on your monthly mortgage payment.

No Down Payment

No down payment required, though you will be responsible for closing costs and escrows.

Lower Monthly Payments

Your monthly payments will be less for a 30-year fixed than say a 15-year fixed mortgage

Fixed Interest Rate

Your interest rate is fixed for the life of the loan, so you don’t have worry about rising rates.

Great Refinance Terms

Refinance your primary home for up to 97% of its value.

Lock In Your Rate

If you’re shopping for a new home, you can lock your interest rate for 180 days with no upfront fees.

Float Down

We also allow a float down within 60 days of the original lock expiring if rates were to drop.
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