What You Need to Know About USDA Loans

by Toni Itkin 02/18/2019

The US government has been helping Americans achieve their goal of homeownership for decades. Through programs offered by the Federal Housing Authority, the USDA, and the Department of Veterans Affairs, millions of Americans have been able to afford a home who would have otherwise struggled.

The focus of today’s post is one such service: loans offered through the USDA Rural Development program.

If you’re hoping to buy a home in the near future but are worried about being able to save up enough for a down payment or build your credit score in time, USDA loans could be a viable option.

Let’s take a look at some of the common questions people have about USDA loans:

Do I have to live in the middle of nowhere to get a USDA loan?

The short answer is “no.” rural development loan eligibility for your area is laid out on a map provided by the USDA. Most of the suburbs outside of major cities, as well as nearly all rural areas, are covered by the rural development program.

Can I qualify for a USDA loan if I’ve previously owned a home?

Yes. You may be eligible for a loan as long as you’re not the current owner of a home that was purchased through the rural development program. So, for example, if you own a home financed through the USDA and wanted to buy a second home and rent out the first one, you wouldn’t be able to finance your second home through the USDA.

How does the USDA loan guarantee work?

When you buy a home, a lender asks you to make a down payment. If you don’t have a down payment, the government (USDA, VA, or FHA) insures the down payment on your home rather than you paying it up front.

Will I have to pay mortgage insurance?

Unlike other subsidized loans, rural development loans require a “guarantee fee” rather than PMI (private mortgage insurance). The guarantee fee is 1% the total mortgage amount and this can typically be financed into the loan (so you don’t have to pay up front). In addition to the guarantee fee, USDA loans also charge an annual premium for the lifetime of a loan.

What are the qualifications for a USDA loan?

To find full eligibility information, complete the survey on the USDA’s eligibility website to find out if you qualify. However, the general qualifications are:

  • U.S. citizenship

  • Buying a home in a qualifying area

  • 24 months of income history

  • A credit score of 640 or higher for streamlined processing

  • Income high enough so that your monthly payments do not exceed 29% of your monthly earnings

What is the direct loan program?

The USDA really offers multiple urban development loans. The guarantee program, for which most single families utilize, and the direct loan program. Direct loans are designed for families who have the greatest need. You can also find out if you’re eligible for a direct loan by filling out the questionnaire on their website.



About the Author
Author

Toni Itkin


MEET TONI ITKIN

Toni Itkin is a licensed Realtor® serving buyers and sellers across BuckheadViningsSandy SpringsRoswellMarietta, East Cobb, and other high-profile areas of Metro Atlanta.

Toni began her real estate career in 1992 with Buckhead Brokers, where she earned "Rookie of the Year” before rapidly ascending to her status as a multi-million dollar producer. Since then, she has been consecutively featured in the Who’s Who of Atlanta Real Estate for many years.

Equipped with sharp negotiating skills, an intuitive marketing acumen, and a strong network of professional relationships, Toni is a fierce advocate for her clients. Whether it’s a one-bedroom condo or a multi-million dollar mansion estate, Toni’s ultimate goal is to find her clients a home that perfectly fits their budget and lifestyle. Toni’s reputation for professionalism and trustworthiness in and out of the brokerage community is of utmost importance to her. As a Certified Luxury Homes Specialist, Toni has a finger on the pulse of Metro Atlanta’s luxury real estate market, and as a Certified Relocation Specialist, she is uniquely positioned to provide support for homebuyers who are relocating.

Toni is a member of Georgia Association of Realtors®, National Association of Realtors®, Atlanta Board of Realtors® and Haute Residence’s Luxury Real Estate Exclusive, Invitation-only Network. Toni is also a recipient of the Atlanta Board of Realtor®’s coveted Crystal Phoenix Award, which means she’s achieved the organization’s "Multi-Million Dollar Club” status for a minimum of 25 years. As a Coldwell Banker Residential Brokerage agent, she is consistently ranked among the company’s top one percent of agents worldwide and has been recognized as an honoree of the International Diamond Society, International President’s Circle, International President’s Elite, President’s Premier, and Society of Excellence.

Toni is also very active in local charities and civic organizations, including Habitat for Humanity, the Best Friends Animal Society and the Atlanta and Cobb County Humane Societies. In addition, a portion of Toni’s sales commission on every closed transaction goes directly to the Cares Foundation, which makes a difference in Atlanta communities by supporting a variety of local charitable organizations.  She lives in East Cobb and enjoys traveling, playing golf and tennis, and spending time with her pets and her husband, Ernie, a Cardiothoracic Surgeon.