USDA/Rural Mortgage Program Guidelines

By
Mortgage and Lending with George Souto NMLS #65149 FHA, CHFA, VA Mortgages NMLS #65149

 

There have been a few changes to the USDA/Rural Mortgage Program since the last program guideline description I did two years ago, so the purpose of the blog is to provide an updated program description of the USDA/Rural Mortgage Program Guidelines.

The three major changes to the USDA/Rural Mortgage Program are:

  • Previously USDA/Rural did not allow for properties to have in-ground pools, now they do
  • Previously USDA/Rural did not allow for properties to have barns, now they do.  This one always struck me as odd since the USDA/Rural is the old Farmers Loan Program
  • Previously the PMI was .40 factor and now it is a .50 factor, and just like FHA it is on the mortgage life time

The USDA/Rural is an excellent loan program especially for First Time Homebuyers, because it is a true no money down 100% fiance loan program.  The USDA/Rural Mortgage Program is restricted to rural areas, and has income limits, but for Borrowers and properties that qualify, it is a great way to purchase a home and only have to pay closing costs.

However, even closing costs can be finance when the USDA/Rural Mortgage Program is combined with a Connecticut Housing Finance Authority (CHFA) Mortgage Program or with another Stated Bonded Mortgage Program.  Sellers are also allowed to contribute to the Borrowers closing up to 4% of the selling price.  With either of these options a Borrower can purchase a home with a USDA/Rural Mortgage program with little or no money out of pocket. 

Below is an updated overview of the USDA/Rural Mortgage Program Guidelines.

 

USDA/Rural Guarantee FEE & Monthly MI

 

USDA allows a Borrower to Borrow:  

  • Up to 102% Loan To Value (LTV).
  • Can role in Closing Costs & Repairs if it can be supported by the appraisal.
  • Does not have a maximum purchase price (unless combined with the CHFA Mortgage Program).
  • .50 Monthly Mortgage Insurance (PMI) lifetime of the loan.
  • Qualifying Ratio's are 29/41 and above with a Ratio Waiver.
  • Minimum 620 middle Credit Score, but some Lenders may require a 660 middle Credit Score.

 Properties that are eligible for USDA loans are:  

  • Existing homes
  • Condominiums
  • Townhouses
  • 1/2 of a duplex
  • Modular homes
  • New construction.
  • New manufactured homes built to HUD Code.  

Even though USDA does not have Sale Price Limits, it does have Income Limits by household size, and they may differ from County to County and State to State.  Income Limits Include:  

  • ALL household income.
  • Seasonal/Overtime/Bonus income may be averaged based on verified history.
  • Pending pay increases may be used as a compensating factor.
  • If total assets >$5000, must include the interest income as part of the
    income eligibility calculation 

USDA Appraisals:  USDA requires appraisals to be done by an FHA approved Appraiser and follow FHA appraisal requirements.

 

 

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

Posted by

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 Info about the author:

George Souto NMLS# 65149 is a Loan Originator who is licensed in #CT, #RI, #MA, #NH, & a #FL Licensed Lender who can assist you with all your #FHA, #Conventional, #VA, #USDA, and #State Bonded Progam #mortgage needs in #CT, #RI, #MA, #NH, & #FL. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net

Comments (26)

Maria Gilda Racelis
Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington - Manchester, CT
Home Ownership is w/in Reach. We Make it Happen!

Good Morning George: Great info. I was hoping to see leniency on septic and well distance.

Bookmarking.

Feb 18, 2015 08:34 PM
Elva C. Benjamin
RE/MAX of Gettysburg - Gettysburg, PA
REALTOR, ABR, CDPE, SRES

Great blog. Thanks so much. Your posts are always so clear and helpful. Lots of valuable info.

Feb 18, 2015 08:34 PM
Joe Jackson
Keller Williams Capital Partners Realty - Columbus, OH
Clintonville and Central Ohio Real Estate Expert

I had a home just 1/4 miles out side of the USDA boundaries.

Feb 18, 2015 09:03 PM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning George,

Excellent information on the USDA loan program. Updates are crucial for clients so they know all the mortgage opportunities available.

Feb 18, 2015 09:07 PM
Ginny Gorman
RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI
Homes for Sale in Southern RI and beyond

George, good to hear of these changes especially on pools here...thanks for the update and may USDA progress further too...

Feb 18, 2015 09:17 PM
Christine O'Shea
Christine E O'Shea Broker - Naples, FL

Great information on a wonderful program.  I have used it in the past as well!

Feb 18, 2015 09:41 PM
Joan Cox
House to Home, Inc. - Denver Real Estate - 720-231-6373 - Denver, CO
Denver Real Estate - Selling One Home at a Time

George, great information for buyers and REALTORS!   Doing most of my business within the City, have not ever had a buyer use the program, but good to know the details, just in case. 

Feb 18, 2015 09:51 PM
Nicole Doty - Gilbert Real Estate Expert
Zion Realty - Gilbert, AZ
Broker/Owner of Zion Realty ZionRealtyAZ.com

Good morning George. Great explanation of this loan program. We don't have much rural land left in my market but once you get outside of Gilbert in to Queen Creek and San Tan Valley there is a lot of farm land and rural areas so this is good information to know for buyers looking in those areas!

Feb 18, 2015 10:09 PM
Bill Roberts
Brooks and Dunphy Real Estate - Oceanside, CA
"Baby Boomer" Retirement Planner

Hi George, I agree that "no barns" didn't make any sense.

Thanks for the post.

Bill Roberts

Feb 18, 2015 11:15 PM
Joni Bailey
101 Main St. Realty - Huntsville, TX
Your Huntsville / Lake Livingston Area REALTOR®

Good Morning, George! Thanks for the update on USDA. We ARE VERY rural! LOL! ;)

Feb 19, 2015 01:47 AM
Tom Ralston
United Real Estate Philadelphia - Downingtown, PA
ABR, e-PRO

I've always thought this is a great program for first time buyers. I have had a few buyers who wouldn't have been able to buy any home if it weren't for this loan program. As with an FHA loan, they are a bit more strict about the condition of the home when it comes time for the appraisal than they would be if it were a conventional loan. 

Feb 19, 2015 03:05 AM
John Meussner
Mortgages in AZ, CA, CO, DE, FL, GA, MD, MT, NC, NJ, NV, OK, OR, PA, SC, TN, TX, UT, VA, WV - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

George, USDA is a tremendous program for those that qualify.  It serves many borrowers in the way FHA used to (benefits for low-moderate income buyers), and eliminates the down payment barrier for buyers.  Great info to share!

Feb 19, 2015 03:36 AM
Chandler Real Estate Liz Harris, MBA
Liz Harris Realty - Chandler, AZ
#ChandlerRealEstateAgent

Good afternoon. Thank you for sharing such useful information on such an important topic!

Feb 19, 2015 04:19 AM
Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi George - The USDA program is one we have had quite a bit of experience with here - it's been relatively easy to use and has helped a bunch of our clients. Thanks for the update.

Feb 19, 2015 07:14 AM
Lisa Von Domek
Lisa Von Domek Team - Dallas, TX
....Experience Isn't Expensive.... It's Priceless!

Hello George,

No barn with a USDA loan...sounds like it was written by a government bureaucrat, doesn't it?  LOL  At least that's been corrected now!

Feb 19, 2015 10:43 AM
Ed Silva
Mapleridge Realty, CT 203-206-0754 - Waterbury, CT
Central CT Real Estate Broker Serving all equally

That is one product that I don't see a lot of call for in the city

Feb 19, 2015 11:15 AM
Larry Johnston
Broker, Friends & Neighbors Real Estate and Elkhart County Subdivisions, LLC - Elkhart, IN
Broker,Friends & Neighbors Real Estate, Elkhart,IN

Hi George,  We have been doing USDA loans more than FHA over the last year, because of the no money down.  The homes are now becoming scarce with the low inventory in those areas.

Feb 19, 2015 12:33 PM
Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

George Souto that's strange that they did not allow barn whereas the program is for farmers. Welcome change for sure. (And not sure why they chose higher PMI now.)

Feb 19, 2015 02:11 PM
Nina Hollander, Broker
Coldwell Banker Realty - Charlotte, NC
Your Greater Charlotte Realtor

Great update, George Souto. I've used USDA loans very successfully from time to time--the big issue in Charlotte is that every year fewer of our areas qualify for the USDA product.

Feb 19, 2015 08:25 PM
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Our area qualifies for USDA loans, thanks for the recap !

Mar 30, 2015 10:52 PM