What is a USDA loan anyway? USDA loans are specifically designed for purchasing homes in rural areas. Some of the areas in Western Washington that are considered rural by USDA guidelines may surprise you. In many cases first time home buyers looking for the suburban lifestyle are finding themselves purchasing homes in areas that can utilize USDA financing.
So what are some benefits of using a USDA loan? Well, USDA’s monthly mortgage insurance is only one third of what FHA’s monthly mortgage insurance premium is. Also, the interest rate for a 30 year fixed loan is lower with USDA than it is with standard conventional financing. Another huge benefit for many first time home buyers is that with USDA, you can secure that low rate and the low monthly mortgage insurance with absolutely NO down-payment. That’s right $0 down, so you can keep more money in your pocket!
What else do I need to know about the USDA loan? First off, there IS an up-front Mortgage insurance premium that will be added to the loan amount of your 30 year fixed loan. This up-front mortgage insurance is 15% higher than the FHA’s premium. The next thing to know is that the monthly mortgage insurance, like FHA, will last for the life of the loan. An additional major factor to consider is that there is a household income limitation. Bottom line, there are a lot of different factors to consider.
Don’t make one of the biggest financial decisions of your life without getting educated! If you would like to gather more information about down payment options or the first time home buying process in general, please go to our Calendar/Reservations page and sign up for one of our FREE First Time Home Buyer workshops.