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USDA Mortgages

A USDA loan, also known as a USDA Rural Development Guaranteed Housing Loan, is a mortgage loan program offered by the United States Department of Agriculture (USDA). It is designed to encourage homeownership in rural and suburban areas by providing affordable financing options to low-to-moderate income households who may not qualify for traditional mortgages.

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Here are the key features of USDA loans:

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  1. Location Eligibility: USDA loans are available for properties located in designated rural and suburban areas as defined by the USDA. These areas are typically outside of major metropolitan areas and have populations below a certain threshold.

  2. Income Eligibility: USDA loans are intended for borrowers with low-to-moderate incomes. The specific income limits vary by location and household size. Generally, the borrower's income must not exceed 115% of the median household income for the area.

  3. No Down Payment Required: One of the main benefits of USDA loans is that they do not require a down payment. Borrowers can finance 100% of the home's purchase price, making homeownership more accessible for those who may not have substantial savings for a down payment.

  4. Mortgage Insurance: USDA loans require an upfront guarantee fee and an annual fee for mortgage insurance. The upfront fee can be financed into the loan amount, while the annual fee is paid as part of the monthly mortgage payment. This mortgage insurance protects the lender in case the borrower defaults on the loan.

  5. Property Eligibility: In addition to location requirements, properties financed with USDA loans must meet certain eligibility criteria regarding size, safety, and condition. Homes must be modest in size, design, and cost relative to the area.

  6. Fixed-Rate Loans: USDA loans typically offer fixed-rate mortgages with terms ranging from 15 to 30 years, providing borrowers with predictable monthly payments over the life of the loan.

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USDA loans are administered by approved lenders such as banks and mortgage companies. Borrowers interested in a USDA loan should check the USDA's eligibility maps to determine if the property they are interested in qualifies, and they should verify their income eligibility based on the area's limits. USDA loans can be a valuable option for eligible borrowers seeking affordable homeownership opportunities in rural and suburban communities.

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23942 Lyons Ave. Suite 215
Santa Clarita, CA  91321
661.388.0345

 

Licensed by the California Department of Real Estate & National Mortgage Licensing System
DRE 02006638    NMLS 1503217

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