USDA (Rural Development-RD) Loans
The U.S. Department of Agriculture doesn’t just provide nutrition services. USDA also guarantees loans in eligible rural areas of the country. When you think “rural” you think of Famers and cows. However, what if I told you that 97% of the country is in an eligible area? Sounds crazy, doesn’t it?
There is a great chance that you are located in a “rural” area of the U.S. and eligible for a USDA-backed mortgage. 0% down payment makes them great for first-time homebuyers.
USDA Home Loan Benefits
Zero downpayment
Low mortgage rates
Finance more than 100% of the sales price
Low PMI (mortgage insurance)
30yr and 15yr fixed rate options available
640 min credit score required
97% of the U.S. is in an eligible zone
Must wait 36 months after a bankruptcy or foreclosure to qualify
Owner occupied properties only
Easier to qualify for that conventional mortgages
Low Mortgage Insurance Premiums
USDA mortgages have the lowest mortgage insurance premium of any home loan program besides the VA, which requires no mortgage insurance. The annual MIP is just 0.30%. When compared to the FHA PMI fee of 0.85% the savings is substantial.
On a $200,000 home, PMI on an FHA loan is $1700 per year.
A $200,000 home, USDA PMI will be just $600 annually, a savings of $1100 per year.
There is a one time up-front mortgage insurance payment of 1% of the loan amount that is added into the loan. Borrowers save an average of $100 per month with a USDA home loan over FHA loans because of the reduced mortgage insurance.
