USDA loans are a great way to purchase a home in rural areas. What is a rural area? In the Minneapolis St Paul area, it means outside the metro area – but areas like Elko New Market, New Prague, Jordan, Waconia, Buffalo, Monticello, Zimmerman, Isanti, Stacy and Chisago City are all possible areas for USDA.
So why are USDA loans a great way to purchase? They are one of two ways to purchase a home zero down. The other is a VA loan. USDA also has a guarantee fee – similar to FHA’s mortgage insurance. They do collect a 1% guarantee fee added to the mortgage, similar to FHA – but FHA is 1.75%. USDA has a monthly fee of .35% compared to FHA’s .85%. Both can save you money, especially on a monthly basis. So an example would be if you have a $200,000 mortgage, the monthly fee on an FHA loan would be $141.67 but an USDA loan would be $58.33! That can definitely make a difference in your monthly payment!!
USDA does have an income limit, it varies by the number of people in the home along with a few other things. Basic income limits for the Minneapolis St Paul area is $97,400. There are things that can affect that number – the number of people in the house, disabled people and people over 62 years of age. The maximum income for this area is $112,850.
Debt to income ratios are usually tighter than FHA loans so that is one part you need to watch. Typically ratios need to be somewhere around 30-33.0 for the housing ratio and 41-43 for overall debt. Meaning if your income is $4000/month, your total house payment should be somewhere around $1200-1300/month and your total debt should be about $1700/month.
USDA loans can be in the city limits, they do not need to be out in rural areas. For those thinking about buying outside the metro area, talk to your lender about USDA loans, it could be a great way to buy. There aren’t many ways to buy a home with zero down!!
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
