USDA Loans FAQs

by Barb Perruccio & Britt Glassburn 02/02/2020

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

Barb Perruccio & Britt Glassburn

BARB PERRUCCIO / MANAGING BROKER

I have been a Wash Park resident and investor for 20 years and a dedicated real estate professional for the past 14 years. I have a degree from Arizona State University from the College of Engineering and Applied Sciences, Graphic Communications in Printing Technologies. I worked in Sales in the Advertising and Marketing industry in Manhattan for 12 years, San Francisco for 2 years and chose to settle in Denver to raise a family. I now have 3 beautiful children and enjoy living and working in Wash Park!

As a Realtor in Colorado, I have leveraged my sales and Sr. Management skills to ensure each and every transaction runs smoothly. As a Certified Negotiation Expert (TM) in real estate and with over 33 years of sales and marketing experience, I am a strong negotiator and will negotiate diligently on your behalf.

Whether you are planning to buy, sell, build or invest in real estate, I have the knowledge to guide you through the process smoothly and take great care in providing the best and most professional service!  My goal is to build strong relationships in our community one person at a time.

BRITT GLASSBURN / BROKER ASSOCIATE

I have lived in the Denver Metro Area on and off since 1977 and have been investing in the Denver Home Market since 1993. This included doing fix and flips and owning rental properties. I have a degree from the University of Colorado in International Affairs. I have worked extensively in the Sales, Account and Project Management industry and enjoy helping people through the real estate transaction process. In 2014 I decided to obtain my real estate license and work as a full time broker associate. I am a Certified Luxury Home Marketing Specialist and Certified Residential Specialist. My goal is to assist you throughout the home selling and buying process as I have the necessary knowledge to provide you with the necessary information when purchasing a home! We are here to make the transaction as smooth as possible!