What’s a USDA mortgage?

For those buying just outside a metro area, a USDA mortgage may be a great way to buy a home!  USDA (or rural development) mortgages are zero down – the only other way to buy zero down is a VA mortgage. For those struggling to find a down payment to buy a home, USDA loans may be the answer!

In this area, you need to be outside the metro area, but on the south end of the cities, ElkoNew Market and New Prague qualify for USDA, so does Northfield.  On the west side of  the cities you can use this mortgage in areas like Waconia, Watertown and Delano.  On the north end you need to be in areas like Zimmerman, Stacy or Isanti.  You can ask your loan officer to check specific addresses to make sure they are eligible for the USDA program.  These cities are near the border so you will want to verify your address to make sure it will work.

There are income limits to the program set by the median income limit to the area, but the family size and any daycare expenses can change those numbers too.  Ask your loan officer to make sure you can qualify based on your income.  

You can ask the seller to pay closing costs or you can get a gift for closing costs.  You do not need to be a first time homebuyer, but you cannot own another home if you are using USDA financing.  The home you are buying must be your primary residence.  You will need a credit score of 640.

There is an annual fee paid monthly and a one time upfront guarantee fee of 2.75% that is added to your mortgage.  As of October 1st, the annual fee is dropping to 1.0% and the monthly fee is dropping from .50% to .35%.  October 1st is the date that we need the USDA approval on, so you could write a purchase agreement before October 1st and close in Oct with the new fees.  This will help people that are starting to look for homes soon and are interested in this program.

This is a terrific way to purchase a home if you are looking just outside the metro area.  Talk to your loan officer and see if you can qualify for this program!

Leslie Vanderwerf,  NMLS ID#335509, American Mortgage & Equity Consultants, Inc, An Equal Housing Lender, NMLS#150953 - Email - Website

Written By

Currently a Senior Loan Officer at Cross Country Mortgage LLC, it's hard to believe I have been in the mortgage business for more than 25 years and have worked with Sharlene since 2000! I love sharing mortgage insights here each week and helping people finance their homes. Listening helps me find the right program for you!

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