USDA Rural Development Guaranteed Housing Loan program

USDA Home Loans are fixed rate mortgages that offer a zero down payment option. Fixed rates are standard and adjustable rate mortgages are not available.

With a USDA Loan Mortgage lenders can provide 100% financing because the mortgages are almost fully (90%) backed the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program. 

There are eligibility requirements regarding income. The program is meant for home buyers with low-to-average income for their area. 

It is also noteworthy to mention approximately 95% of the United States is eligible for a USDA loan.

Another positive feature of a USDA Loan is that it offers reduced mortgage insurance premiums even at the no down payment or at 100% LTV.  There is a 1% upfront fee paid at closing plus an annual fee, which is paid monthly, of .35% of the unpaid principal balance.

Let’s compare three loans types:

Scenario: A $200,000 loan in Royal Oaks, Santa Cruz County, CA 

                                               USDA                 FHA                    CONV

Down Payment                    $0                      $7,000 (3.5%)     $10,000 (5%)

UFMIP                                   $2,000              $3,377.50            $0

Monthly Mtg. Insurance     $58.33(.35%)  $135.79(.85%)    $96.50(.60%)

Income Limit:                       $131,700         None                     None

It’s clear USDA Loans provides the lowest barrier to home ownership.