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USDA Rural Housing Loans

The United States Department of Agriculture (USDA) offers mortgages for people that wish to purchase or refinance a home located in a rural area. The USDA offers these loans through mortgage bankers, banks and credit unions. The general process is to have the file reviewed and underwritten by the mortgage banker or bank. Then the completed file is forwarded to the nearest USDA field office for final review.

USDA allows borrowers to take out a loan up to 100% of the appraised value of the home. The closing costs, as well as the funding fee, can be added to the loan amount if the appraised value is high enough. This means that a borrower can purchase a home with absolutely no money out of pocket.
Effective October 1, 2014, USDA now charges a 0.5% yearly fee that is paid monthly. The credit guidelines for the USDA loans are very similar to the FHA and VA guidelines.

USDA Rural Housing Purchase

In order to buy a home using a USDA mortgage there are two pre-requisite criteria that must be met. First, the home must be located in a rural zone, as defined by the current USDA mapping system. Secondly, the borrower’s income cannot be higher than the income guidelines established by USDA for that particular area. A mortgage loan officer can help the borrower find the information for both of these requirements.

USDA Rural Housing Refinance

Homeowners who currently have a USDA mortgage and are current on their mortgage payments may apply for a streamline refinance. This refinance is designed to lower the monthly payments by taking advantage of rates that are better than the homeowner’s current interest rate. The streamline refinance does not allow the borrower to receive any cash for other purposes.

Additional Resources
Guarantee Fee
Income Limits
Ineligible Areas



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