USDA Loan Program
First Time Homebuyers and USDA Loans
Purchasing a first home is an exciting milestone in any person’s life. However, those unfamiliar with purchasing a home – especially with a USDA Loan – will often find themselves with quite a few questions.
Below we look at the benefits of USDA loans and cover common questions about the program.
What Makes the USDA Loan Good for First-Time Homebuyers?
The USDA loan has significant advantages for rural homebuyers. These benefits include:
- $0 down. Being able to secure financing without a down payment is among the major advantages to first-time homebuyers wishing to use a USDA loan. The USDA loan is one of the last remaining mortgages in the U.S. that does not require a down payment.
- Lenient qualification standards. Due to the USDA guaranteeing a portion of each loan against default, lenders are able to provide lenient eligibility requirements as well as competitive rates and terms.
- Low mortgage insurance. The upfront guarantee fee, which can be rolled into the loan, is only 1% of the loan amount while the annual guarantee fee is only 0.35%. In comparison, on a 30-year FHA loan with a 3.5% down payment the fees would be 1.75% and 0.85%, respectively, much higher than the USDA loan.
Who is Eligible for a USDA Loan?
First-time homebuyers should understand that the USDA loan has qualifications for the homebuyer and property.
Homebuyers must meet their lender’s and the USDA’s credit and income requirements. This often includes a 640 credit score, which is the cutoff for automated underwriting – however, lower credit scores may still qualify.
Homes being purchased with a USDA loan must be used as the homebuyer’s primary residence and be located in what the USDA considers a rural area. Fortunately, the USDA’s definition of rural encompasses homes ranging from small towns to suburbs of metropolitan areas.
Learn more about USDA loan eligibility here.
How Much Home Can I Afford?
After deciding if now is the right time to buy, many potential homebuyers then ask themselves, “How much can I truly afford?”
This question takes on many factors, including you and your family’s income, additional debts, a potential down payment – which isn’t required with a USDA Loan – in addition to costs like homeowners insurance, property taxes and HOA fees if applicable.
To help determine what you can afford, see this convenient USDA Mortgage payment calculator.
Other Helpful Resources for First-Time Homebuyers
USDA Home Loan Calculator
This USDA Loan calculator gives you a snapshot of what your monthly payments could be as a first-time homeowner using the USDA loan.
USDA Loan FAQs
Here you will find a list of common questions on the USDA loan.
See if You Qualify for a USDA Loan
Speak to a USDA loan specialist and find out if you qualify for a USDA loan.