USDA loans are a favorite among borrowers, especially first-time home buyers, because you can finance 100 percent of the mortgage through this program. Additionally, USDA mortgages have lower mortgage insurance rates than other programs offered by the government, helping to reduce monthly payments.
Many people mistakenly believe that USDA loans are only for rural properties. In fact, these loans are often referred to as “Farm Home Loans.” However, under the guidelines of this program, many suburban areas qualify for a USDA loan.
USDA mortgages are guaranteed by the government, making them a very low risk factor for lending institutions. Everyone, even with a little bit of tarnish on their credit history, has an easier time gaining approval for this type of mortgage.
The main qualifying factor for a USDA mortgage is income level. USDA loans are designed to help lower income families qualify to purchase a home. The new guidelines for 2015 have just been set and are as follows:
1) The total family income for a family of 1 to 4 cannot exceed $74,750.
2) The total family income for a family of 5 to 8 cannot exceed $98,650.
For every family member over 8, an additional eight percent can be added to the income.
It should be noted that this is the average guideline and may not apply in all areas of the country. The USDA has adjustments in income levels based on the area in consideration. For example, San Francisco, California has the highest cost of living standards in the country. In this area, a family unit of 1 to 4 people would have a base income guideline of $131,100. Income levels can vary within the same state.
To determine the exact income guidelines in your area you should speak with an experienced mortgage professional that is familiar with this program.
The Benefits Of USDA Mortgages
The largest benefit to this type of mortgage is the ability to finance 100 percent of the cost of the home. The program is designed to encourage homeownership and make it possible for anyone to buy a home. The program also allows mortgage insurance premiums to be rolled into the loan package, further reducing out-of-pocket expenses to home buyers.
USDA loans can be used to purchase a new home or for refinancing a current loan.