Derek Egeberg is the Approval Coach!

Yuma Mortgage & Yuma Home Loan Specialist • NMLS# 180899

USDA Home Loans

What is a USDA Home Loan?

Academy Mortgage’s USDA Home Loan Program provides 102% financing (the purchase price and guarantee fee) for low- to moderate-income homebuyers wanting to buy a home in a rural development area. USDA Home Loans are affordable and backed by the federal government. Qualified program participants must purchase a home in an eligible rural area, as defined by the U.S. Department of Agriculture, and have a household income that does not exceed the established limits where the home is located.

What are the benefits of a USDA Home Loan?

USDA Home Loans offer the following features:

  • 100% financing on a fixed 30-year loan, based on the appraised value of the home.
  • 2% guarantee fee may be included in financing.
  • No down payment required.
  • Competitive interest rates.
  • Lender fees and closing costs (including prepaid funds) may be contributed by the seller or may be eligible to include in the loan, depending on the appraised value.
  • Gifts or grants permitted from family, friends, and non-profit agencies.
  • No post-closing reserves or minimum investment required.

Who may benefit from a USDA Home Loan?

Both first-time and experienced homebuyers may take advantage of a USDA Home Loan, provided they meet the following qualifications:

  • Income limits cannot exceed the USDA’s Rural Development Single Family Housing Guaranteed Loan Program income limits for the area.
  • Must have a minimum credit score of 640 (660 if have a prior short sale) and debt-to-income ratio of 41%.
  • Credit history with no more than one “30-day late” payment in past 12 months and no major credit problems in previous 36 months.
  • Eligible properties include existing single-family homes, new construction, modular homes, planned unit developments (PUDs), and eligible condominiums.

How Do You Find a USDA Choice Home?

You and/or your family are ready to purchase a home in a rural community. You have researched and decided that a USDA home loan guarantee is perfect for you to help obtain a mortgage. You have contacted a USDA approved lender and successfully applied and are pre-approved for a home loan. Now what do you do?

Before you begin searching for your home, there are a few things you must take into consideration. There are restrictions on where the home is located. The home must be construction standards. And the home must meet the size and cost within your approved mortgage budget.

Finding the perfect home is like finding the proverbial needle in a haystack. Add the qualifications required by your mortgage guarantor, and it makes finding the perfect home even harder. But if you start with the limitations and restrictions in mind, you will have a much easier time locating a home that is suitable and functional for your family's needs.

A qualified rural area

A home purchased through the USDA home loan guarantee program must be located in a qualified rural area. Qualified rural area is defined as open country places, and homes in cities with populations of 10,000 or less. Under certain conditions, the home may be located in towns and cities of 10,000 to 25,000 in population. If you have questions regarding whether a potential home is in a qualified area speak with a representative from a USDA Rural Development field office.

New or existing home

You can shop for a new home recently constructed, or an already existing home. If you decide upon purchasing a new home built within the last 12 months, you will need the following:

  • A certified home inspection approving the soundness of the foundation, framing, and meeting all local and state codes.
  • Certificate of occupancy.
  • A builder's 1-year home warranty.

If you decide to look for a home previously built, meaning it was constructed more than 12 month prior, the home must meet the following requirements to qualify for a USDA home loan guarantee:

  • Structurally sound - The home must have been built using materials that achieve a structurally sound construction. The home must be in good repair that the time of purchase.
  • Functional - The home must adequately functional as a dwelling. An adequate bedroom to bathroom ratio is taken into consideration. A functional home must have running water, appropriate ingress and egress, and adequate heating, cooling and venting. A barn converted into livable quarters may indeed make a good home. But it must meet the functional test.
  • Any size or design - A USDA home loan mortgage is good for homes that are any size and design. As long as you the borrower qualify for the mortgage amount, you could purchase any size home that meets the needs of your family. However, the USDA home loan program stipulates that the home must be "modest" in size and design. According to the USDA Rural Development website, modest is "property that is considered modest for the area, does not have market value in excess of the applicable area loan limit, and does not have certain prohibited features."
  • Owner occupied only - The home you purchase for yourself or your family must be your primary dwelling. Homes purchased through the USDA home loan guarantee program cannot be income producing, meaning you may not rent the home to others or make it a commercial building.

A previously constructed home must also show documentation and certification of a termite report, as well as a qualified home inspection.

Finding the right home to purchase using the USDA home loan guarantee program can be daunting. But knowing first-hand what you need to look for will help you shorten your shopping time - allowing you to move into a beautiful home soon!

Learn more about USDA Loans:

For more information

Contact your Loan Officer today to see if a USDA Home Loan is the right solution for you. We take pride in delivering value and savings to homebuyers in our country’s rural populations. It would be a pleasure to help. Visit the USDA Rural Development website for additional information.