USDA Guaranteed Home Loan

The other day, I mentioned that we were recently pre approved for a $175,000 USDA Guaranteed Home Loan. I knew absolutely nothing about USDA loans when my husband applied us for one. So I thought I would share a little bit about what I’ve learned so far.

What is a USDA Guaranteed Loan?

The USDA Guaranteed Loan program aims to help moderate income levels and lower to be able to buy a home in rural areas with no money down. Only certain areas qualify for the USDA loans, for instance in our area we can’t buy a home in Vancouver, WA. We can however go outside the city lines of Vancouver, Camas and Washougal to places like:

  • Ridgefield, WAUSDA map
  • Battleground, WA
  • Hockingson, WA
  • Yacolt, WA
  • LaCenter, WA
  • Woodland, WA
  • Kalama, WA

 

The USDA does provide access to a map so that you can find out what areas qualify for the USDA Loans.

USDA Guarantee Fee

In place of Private Mortgage Insurance (PMI), you have to pay a guarantee fee—which is essentially the same idea. I believe we will have a guarantee fee (mortgage insurance) of 0.3% for our USDA Guaranteed Loan. Not as bad as PMI, so that’s nice.

About USDA Guaranteed Loans

You don’t have to buy a farm or a house out in the sticks, which was my first thought when I heard rural areas. There are a ton of in-town regular homes in cute little neighborhoods just like where we live now. Not that I would mind being secluded and owning a couple of acres, that’s what we’ve always wanted.

There’s more to the USDA Guaranteed Loans than I can tell you about, just like with traditional home loans. But here’s a little more information about them:

  • USDA Guaranteed Loans aren’t only for people buying their first house.
  • 100% financing available = no down payments
  • They want you to get a modest house, nothing too extravagant.
  • 30 year fixed interest rate home loan, no evil adjustable rate mortgages here
  • Costs associated with buying the house can be added into the loan, as well as certain needed repairs and possibly improvements.
  • Closing does take longer than with a traditional home loan because it has to be approved by the USDA first.
  • The actual kinds of homes you can purchase with this loan are up to your lender.
  • Your interest rate also depends on which lender you use and the rate must be locked in, then re-locked if you need more time before closing. Of course, your interest rate is primarily determined by your credit score.

 

One thing worth considering (aside from things to consider when buying a house in general) when looking for homes out of the area you currently live in, is increased transportation costs. All of the areas that qualify for us to buy a home in are farther away from my husband’s work. So the farther out we go, the more it’s going to cost us in gas money and travel time.

•••••••

Of course, I’m not a professional or very experienced with any of this. This is just what I have gathered so far from reading, my realtor and the lender we’re using. Feel free to let me know if I’m wrong about stuff. 😉

 

Have you ever used a USDA loan?
Would you consider one? 

About Jen Perkins

Likes: saving money, being debt free (aside from our house), zombies, travel, getting money, blogging and dogs. Dislikes: debt, being broke, bunnies, wasting money, not having enough money to travel the world and paying interest. Facebook  ♥  Twitter  ♥  Google+  ♥  RSS

Comments

USDA Guaranteed Home Loan — 22 Comments

  1. We bought our house with a USDA loan and it has been a great experience. My issue was that it’s tough to refinance and you’re stuck with a 30-year loan.

    The problem with the 30-year loan is if you’ve been in it for 3 years (like we have), then your only options to refinance are: (1) get another USDA loan for 30 years – so you’d be adding 3 more years back onto your loan which we don’t want to do or (2) get a traditional loan which you’d have PMI.

    The other hurdle we initially had was the income level. My wife wasn’t working at the time we bought the house so our AGI was under $80k (which was the limit in our area for a USDA loan). However, if she would have been working then we wouldn’t have been able to go with them.

    • Sounds like they don’t really want you to refinance, that sucks. So now that your wife is working, does that mean that you wouldn’t qualify to refinance with USDA?

  2. It is my personal opinion that you shouldn’t consider buying a home until you have 20% to put down. At the very minimum, you should put down 10%. Also, you need to consider if you plan on moving in the next few years. If so, you should consider whether it would be worth it to buy at all.

    If you get a traditional 30 year mortgage, you will pay off very very little of the principle in the first 5 years or so. Therefore, if you want to move and sell your home, you could have to sell it as a loss after you have to pay a realtor 6 or 7%, pay closing costs, etc.

    If I were you, I would not buy anything unless I could afford a 15 year mortgage. I personally think that 30 year mortgages are a little crazy. 30 years is an extremely long amount of time!!!!!!!

    • As for down payments, I’d rather have that money to cover emergencies or to invest, not locked into a house. Then your only options would be to sell your house or HELOC for quick cash.

      I always joke about how for the first few years, you’re paying all but a buck to interest. It sucks how they do it, but the banks need to make their money too.

      I think everybody’s situation is different and what works for one person doesn’t always work for everybody.

      For us, we’ve been paying to live in apartments for the last 10+ years. Each month, that money is just (in a sense) being thrown away. If we had been putting that same money toward a mortgage instead, we’d have decent equity build up by now.

      Also, we are stick and tired off dealing with all the apartment living. It SUCKS! I’d much rather pay a little extra and have the privacy and options that come with owning our own house.

      Even if we our income was twice as much, I wouldn’t do a 15-year mortgage. Interest-wise, they’re way smarter—but if you never know what’s going to happen. It’s all about being able to cover whatever comes up without screwing ourselves. With a 30-year mortgage, you can still make extra payments to pay it down quicker.

      That’s just my personal opinion, but I really believe we’re all so different and we have to take our situations into consideration along with what’s most important. :-)

      • Just speaking from personal experience…

        My sister just sold her house that she lived in for 4 years (with a 30 year mortgage). She had to show up at closing with almost $10,000 just to sell her house (she had to pay the realtor 6% and closing costs for the buyer). So, really she didn’t ever own anything…she just paid a ridiculous amount of money to rent the place. Now she’s moving to another house with another 30 year mortgage and will probably do the same thing again one day.

        I do agree with you that renting sucks. We have rented before, a long time ago. Owning a home is a lot more fulfilling.

    • Yep, well at least for the next 9 days. We’re moving a little East to stay at my parent’s house for a bit.

  3. In Canada we have CMHC insurance, which is essentially the same thing.

    I bought my house with 5% down, but then again my house only cost 95K and I was set to make 50K a year in my first year as a teacher. Despite everyone telling me not to do it, and how I was solely responsible for the housing bubble etc., I don’t regret my decision at all. Just like I figured, housing has went up in my area, and I have deeply enjoyed my new home as opposed to renting and then moving at a later date with a bigger down payment (I hate moving). If you made the educated decisions and feel comfortable with it, don’t listen to anyone else!

    • Great job for not listening to anybody, otherwise you wouldn’t have your house—plus all that equity. :-)

      I know that so many people out there have had their own experiences and heard of other’s experiences and usually just mean well. Mainly, people are trying to help others to make smarter decisions. It’s just hard sometimes because it’s so rare that we really know enough about other people’s situations to give personal advice.

      I think we’ll be okay, if not…I handles the finances, so I’ll just have to make it work. :-)

  4. Thanks for this info. I had never heard of this, but the county where we currently live is in the eligible area, and it sounds like our income would qualify us too. Good to know!

    • Yeah, I was surprised there was something like this out there to help people. Good luck if you decide to buy a house too, Mindy. :-)

  5. Interesting information. I would be interested to know what the household income ranges are that would tie back to being able to potentially qualify.

    I am also pretty traditional in that I think 20% is an ideal down payment, and at the very least 10%. I see your point about wanting it for emergencies, but the interest you’ll pay on that amount you could have otherwise put down, over a 30 year period, is a pretty hefty amount.

    I also think each househould’s personal situation can lead to whether be in a 15-year or 30-year mortgage. We re-financed our 30-year mortgage to a 15-year after four years, so it effectively will work to a 19-year mortgage. For us, we’d been making an extra payment of around $200/month after having paid off a student loan. The re-finance raised our base payment $160, which was below the $200 we were already paying, and we got $500 more per month applied toward principle. It was a no-brainer for us.

  6. That’s so great. My knowledge about home loans is limited as I’ve never bought before. I don’t know if I could go too rural. It’s worth looking into, though.

    • My knowledge is still limited even though I’m smack-dab in the middle of it now. :-) I’m learning as I go though.

      We don’t want to go too rural either because my husband already spends close to an hour on his commute as it is. The areas we’re looking in are right off the interstate, so that makes it easier.

  7. Hi Jen! Nice blog and thanks for giving information, about USDA guaranteed loan. If we compare these to PMI USDA is better option. Thanks for the blog, before this I had less idea about USDA loans. But after reading your blog I have a great idea about loans. Thanks for the blog.

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