Principle Home Mortgage offers USDA home loans in addition to other great mortgage loan products. USDA/Rural Housing loans are a great option for a borrower looking to lower their upfront out-of-pocket costs, but these home loans may only be used on qualified real estate. USDA home loans have no down payment requirements, with significant seller assist allowed (if negotiated in your sales contact) towards closing costs. This loan product does limit income but is a great tool for any home buyer that fits the qualifications in State College, PA or the Centre County region. A USDA/Rural Housing loan is available in forward purchases and refinances.
- Seller Assist: Up to 6%
- Agency: US Department of Agriculture/Rural Housing Authority
- Max Loan-to-Value: 100%
- Max Loan Amount: No guideline is set, but based upon your debt-to-income (DTI) ratio and maximum qualifying income set by USDA.
- Mortgage Insurance: Required but is lower than other mortgage products with comparable terms. This amount is set an annual percentage of 0.35%
- Upfront Mortgage Insurance: Required 1% of the loan amount; can be financed
- Max Income: 2019 maximum income is set at $82,700 for most areas in Pennsylvania. (see link below for map)
- DTI Requirement: 41% but varies by lending bank, can be higher based on an automated system approval.
- Credit Requirement: 640; set by the USDA. The score can be lower based on automated system approval. 640 is the minimum credit score for a manually underwritten USDA mortgage.
- Down Payment Requirement: As little as 0%.
- The USDA backs your home loan: Unlike other mortgage products, a USDA home loan is guaranteed by the USDA/Rural Housing Authority. This guarantee is extended to the private lender in the case of foreclosure, allowing the lender to recover most or all of their investment, resulting in less risk to the lender. For the borrower, this can increase the likelihood of obtaining the loan under better terms than other loan programs.
- No required down payment: USDA home loans are one of the mortgage programs that do not require a down payment, unless the subject property’s sales price is higher than the appraised value. Do remember there is a difference between closing costs and down payment.
- Typically, terms and interest rates are better: When comparing USDA/Rural Housing home loans with other loan product types such as conventional or FHA, USDA home loans typically have lower interest rates and better terms.
- Lower Upfront Mortgage Insurance and Monthly Mortgage Insurance: FHA requires the borrower to pay a UFMIP (Upfront Mortgage Insurance Premium) and MIP (monthly insurance premium) for the life of the loan in most cases. Conventional loans require the borrower to pay PMI (private mortgage insurance) if less than 20% is provided as a down payment, and it continues until the loan-to-value reaches 78%, or the borrower actively seeks out to cancel it at 80% loan-to-value. USDA home loans do require both an upfront fee and annual mortgage insurance (split to monthly payments) but both are lower than the FHA program, and typically lower monthly costs than conventional loans.
HOW DO I APPLY?
Applying for a USDA/Rural Housing home loan is simple! You will need 2 years tax returns and W2s, 2 months bank statements, 2 forms of ID, and 30 days of paystubs. If you are self-employed, these requirements may vary slightly. Please note that while you may meet the income guidelines for a USDA home loan, the agency does consider the income of all earning adults who will be residing in the home even if they are not on the mortgage for the household maximum income ceiling. To determine your eligibility for a USDA home loan in State College, PA and the Centre County region, reach out to Principle Home Mortgage at (814) 308-0959 to discuss your home financing needs.