USDA Releases 2015 USDA Loan Guidelines

USDA Loan Guidelines:

The United States Department of Agriculture has a guaranteed mortgage loan program that it sponsors. USDA loans are residential mortgage loans that are commonly also known as the USDA Rural Development Guaranteed Housing Loan Program.  It is also known as the Section 502 loan which is named after the USDA charter.  Rural Housing Loans, USDA loans, do have specific USDA guidelines and USDA mortgage loan borrowers need to qualify under USDA lending guidelines and the property must be in a rural areas throughout the country that has been designated and classified rural areas by the U.S. Department of Agriculture.  Although USDA loans are for rural areas, there are also thousands of smaller suburban areas throughout the country that also qualify for USDA loan programs.

USDA Loan Guidelines And Requirements

USDA loans are extremely popular and sought after by many home buyers due to the USDA loan program’s unique no money down payment and low mortgage rate features.  You can purchase a home in a rural area with no money down and no closing costs with a USDA loan.

USDA is not a mortgage lender and does not orginate nor fund USDA loans.  A USDA approved mortgage lender will originate and fund the mortgage loan and the United States Department of Agriculture, USDA, will guarantee the USDA approved lender in the event if the USDA mortgage loan defaults against loss.  Since the USDA lender is guaranteed the loss against loss on the USDA loan, the risk to the USDA mortgage lender is minimal.  With low risk means low rates and that is how USDA loan home buyer can not just enjoy the perks of 100% financing but also extremely low mortgage rates.  Typically, mortgage rates on USDA loans are much lower than any other mortgage loan program including Conventional loans, FHA loans, and VA loans.

USDA Loan Guidelines On Mortgage Insurance

USDA loans require both upfront mortgage insurance premium as well as annual mortgage insurance premium.  The upfront and annual USDA mortgage insurance premium has last been updated on October 2012 and remains unchanged as of today.  USDA loan upfront mortgage insurance premium is 2.0% which can be rolled into the balance of the USDA loan.  There is also a 0.40% annual mortgage insurance premium that needs to be paid every year.

2015 USDA Loan Guidelines On USDA Loan Limits

To be eligible for a USDA loan, the property needs to be in a designated USDA region and the home buyer needs to meet USDA mortgage lending guidelines.  As mentioned above, USDA allows a home buyer to get a USDA loan with 100% financing and the upfront mortgage insurance premium can be added to the balance of the USDA loan.  Closing costs can be avoided by getting a sellers concession towards a home buyer’s closing costs or by a lender’s credit.  One of the setbacks with USDA loan programs is that the household income of the home buyer cannot exceed the maximum income limites of a particular area that the property is located.  USDA mission and goal is just to promote homeownership for home buyers with modest income and means and not those who have higher incomes.  To meet USDA loan income guidelines, the home buyer’s household annual income cannot exceed the median household income for that particular region and/or county by more than 15% with allowances adjusted for the size of the home buyer’s household.  The more members a household has, the more income is allowed.  For example, the income threshold for a 10 member household is much higher than those of a 3 member household.

Here is the maximum USDA loan income limits for 2015:

Households with one to four members in households is $74,750.

Households for five to eight member households is $98,650.

The income limits for USDA loan income calculations is different depending on the state and the regions.  High cost areas such as California where it is one of the most expensive areas and has high cost of living, the 2015 USDA loan income guidelines for a home buyer with 4 or fewer members in their households is capped at $131,100.  An average of 8% to each household member can be used as a standard adjustment income increase for households greater than 4 members in their household.

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