What is a USDA Loan?
A USDA loan is a program backed by the US Department of Agriculture that promotes home ownership in underserved rural areas. The loan is available only to borrowers living in USDA-eligible areas who meet income guidelines, typically limited to low-moderate income borrowers.
USDA is probably most popular as one of the few truly 100% financing loan options. For borrowers that meet area and income guidelines, there is $o down payment required to purchase a home using a USDA mortgage loan.
Rates on the program are competitive, and underwriting guidelines are similar to FHA loans, allowing for less than perfect credit, and an easy loan process for qualified borrowers.
USDA Mortgage FAQ
Does USDA require a down payment?
No, USDA mortgage loans require $0 down payment for qualified borrowers.
How Much Money Do I Need to Buy A Home With USDA?
USDA doesn't have a minimum dollar amount required to buy a home, but home buyers planning on using USDA should keep in mind many sellers will require a deposit on the sales contract.
USDA does allow for up to 6% sellers assistance (seller paid closing costs), so theoretically, if 6% covers all closing costs on a $0 down payment loan, a buyer could purchase a home with $0 out of pocket.
Can I Refinance with a USDA Mortgage?
Yes! USDA borrowers can refinance, however there are some restrictions. Since USDA is a program designed to promote home ownership in rural areas, someone cannot refinance for just any purpose. Unlike FHA and conventional loan options, borrowers may not "Cash out" on USDA loans. They may restructure their loan through a "rate/term" refinance, but are unable to receive cash at closing.