USDA Home Loans
The USDA loan is also known as the USDA Rural Development Guaranteed Housing Loan Program. Like the FHA, VA, and other government-backed loans, it’s guaranteed by the U.S. Department of Agriculture. Originally designed to help provide a mortgage alternative to rural property buyers with limited financing options, USDA loans are used today as a viable mortgage option for people who want to live away from urban areas.
Advantages of a USDA Loan
MAY NOT NEED A DOWN PAYMENT |
VERY LOW INTEREST RATES |
LOW MONTHLY PRIVATE MORTGAGE INSURANCE |
FLEXIBLE CREDIT GUIDELINES |
|---|---|---|---|
| The USDA loan comes with 100% financing. You don’t need to make a down payment, which can often be a big obstacle for first-time homebuyers. | Because the loan is guaranteed, Midwest BankCentre offers a lower standard interest rate. | As of October 1, 2016, the upfront mortgage insurance rate on a USDA loan is just 1%, with an annual fee of only 0.35%, the lowest number of virtually any mortgage financing program. The upfront fee can also be rolled into the loan, eliminating an out-of-pocket expense at closing. | Borrowers with lower credit scores or less than perfect credit history can often meet the program’s qualifying guidelines. |
USDA Loan Restrictions and Eligibility Requirements
- Eligible geographic areas
- To get a USDA loan, the property you buy must be in a USDA-designated rural area. Almost 97% of the U.S. is eligible, which includes small towns and suburbs. The USDA Mortgage-eligible area requirement map will show you where you can use this loan.
- Income limits
- The USDA loan was originally designed for low - to - moderate-income borrowers. The program’s guidelines define income level as being up to 115% of the area’s median income. For lower-income buyers, all of a household’s income is considered during the application process, which helps increase eligibility.
- Length of the loan
- The Midwest BankCentre USDA loan is a 30-year fixed rate loan, one of the most common types of mortgage, with low and affordable monthly payments.
If you have questions, please call us at 314-633-6060, or email us at: newhomeloans@midwestbankcentre.com.
About Midwest BankCentre
Midwest BankCentre, St. Louis' second largest locally-owned bank, has assets in excess of $2.7 billion and deposits in excess of $2.27 billion. Midwest BankCentre has approximately 280 employees who work at various locations in the St. Louis and Chesterfield area.
Our financial services include personalized consumer and business banking as well as cash management, Chesterfield mortgage loans, home equity loans, financial planning, investments, and insurance. We aim to empower people and enable businesses. Each customer is unique and we offer a wide range of products at competitive rates. We offer personalized services to meet your needs and help you reach your goals.
We are determined to make long-term, meaningful investments in communities that will lift all people up so we can all RISE TOGETHER.
If you're considering buying a home as a first-time home buyer, the Single Family Housing Guaranteed Loan Program may be a perfect fit for you. With a 30-year fixed-rate mortgage loan, this program offers you the chance to buy a home without putting down any money or having a minimum credit score. These loans are available through approved nationwide lenders. Learn more about the Single Family Housing Guaranteed Loan Program below, and call Midwest BankCentre if you have any questions at all. Here's a breakdown of the program and its key benefits.
What are USDA Home Loans and how do they work?
USDA Home Loans are mortgage options provided by the United States Department of Agriculture (USDA) to help individuals and families purchase homes in rural areas. This rural housing loan is designed to promote homeownership in eligible rural communities and offer attractive features such as low interest rates, little or no down payment, and flexible credit requirements. To qualify for a USDA Home Loan, borrowers must meet income limits and the property must meet certain location and condition requirements.
What is the difference between a USDA Home Loan and an FHA Home Loan?
While both USDA Home Loans and FHA Home Loans are government-backed mortgage options, they cater to different borrower profiles. USDA Home Loans are designed for individuals and families looking to purchase homes in rural areas, whereas FHA Home Loans are available for borrowers nationwide. Additionally, a USDA mortgage loan has income restrictions and property location requirements.
USDA's Rural Housing Service (RHS)
The USDA's Rural Housing Service, a Department of Agriculture division, administers several housing programs. These programs are designed to improve rural communities by offering affordable, decent housing. Specifically, they offer loans for low to moderate-income individuals who are buying a single-family home or renovating an existing property. These loans are administered by the USDA's Rural Housing Service, which works closely with Ginnie Mae, a government-sponsored housing agency.
The USDA offers two types of Section 502 loans: the Single-Family Direct Loan and USDA's Rural Housing Service Single-Family Housing Guaranteed Loan. They are similar programs but serve different purposes. Single-family housing guarantees are designed for low-to-moderate-income households in rural areas. However, this USDA loan program is not appropriate for all applicants.
Both loans require that property purchasers meet income requirements. The USDA does not set a maximum loan size. However, it does cap the debt-to-income ratio of borrowers who qualify for the program. The debt-to-income ratio may be up to 41%, but if the credit score of the applicant is over 660, the program may be more lenient. If you are a repeat buyer, you can take advantage of this USDA loan program. The USDA offers a list of approved lenders, but it is important to note that you must have a credit score of 660 or higher to qualify for the program.
USDA's Single Family Housing Guaranteed Loan Program
To qualify for a USDA-guaranteed loan, borrowers must have a household income of 115% or less of the area median income. They also must demonstrate a clear ability to repay the USDA rural housing loan, though alternative proof of credit history is acceptable in place of conventional credit reports. Furthermore, applicants must plan to use the property as their primary residence and must be unable to obtain a conventional no-PMI (private mortgage insurance) loan.
To qualify for the USDA Single-Family Housing Guaranteed Loan Program, applicants must work with a mortgage lender who is accredited to provide such loans. The SFH Guaranteed Lender will determine an applicant's eligibility and facilitate the application process. Once the mortgage lender has approved an applicant, the process will be completed, allowing the home buyer to close on the property. This is a great way to get into the housing market and build equity.
Before applying for the USDA rural housing loan, applicants should have a good credit history. The USDA requires the applicant to be employed and have no history of bankruptcy or repossession. If a person is self-employed, they should be able to produce two years’ worth of income records. Seasonal employees need to show proof of income for two years. Year-round employees need only submit one year's worth of records.
USDA's Direct Loan Program
If you're looking for a low-interest mortgage with low fees, USDA's Direct Loan Program for single-family housing may be a great option for you. This loan is backed by the federal government and is available to any individual, nonprofit organization, or federally recognized tribe. These loans are offered at below-market rates and come with a two-year repayment period. In addition, there is no down payment required!
A USDA Direct Loan Program for single-family housing has strict income eligibility requirements. This income level may be even lower if you're eligible for the Single Family Housing Guaranteed option. Those with low credit scores can apply for these loans and still qualify if they meet the guidelines.
The amount of the USDA loan you qualify for will depend on your income, but part of your income will be used to determine if you'll be able to pay it back. The Direct Loan Program for Single Family Housing also has a tool to assess your eligibility, which takes into account your monthly income and debts, your household composition, your estimated property taxes and hazard insurance. While the guidelines for the USDA Direct Loan Program are strict, the program can help you purchase a home with a low down payment, and Midwest BankCentre can help you get approved today!
