There is a loan program that’s been around for quite some time but gets very little attention. And that’s a shame because the USDA home loan program is perhaps the ideal option for those wanting to buy a home with no money down who are not VA eligible. If you want to buy a home in Georgia and want or need to come to the settlement table with as little cash as possible, a USDA loan should be one of your choices. What is the USDA home loan program and how can it be used?
The USDA loan requires zero money down with some very competitive interest rates. The USDA loan does come with a couple of requirements that must be met in order for a lender to process and approve a USDA loan request. The program can only be used to finance a home located in an approved USDA area. The USDA loan program is designed to finance those who want to purchase a home in a rural or semi-rural area. That means the loan can’t be used in downtown Atlanta and surrounding areas. For instance, while downtown Atlanta, Macon, or Savannah is largely considered a region not approved for a USDA loan, some smaller suburbs very well may be.
For those who are considering a USDA home loan one of the first things done is to make sure the proposed property is in fact located in an approved region. If it is, the borrowers must also pass an income test as the program is also designed for middle to lower income households. The USDA loan can be used to finance a property as long as the household income does not exceed 115% of the median income for the area.
For example, the Georgia USDA Rural Housing income limit for a standard household of 1-4 members is $110,650. Even higher when there are more than 5+ members in the household. It’s important to note here the gross household income is not used as there are some calculations your lender needs to apply to take into consideration certain withholdings but the 115% can point you in the right direction.
Edit: please see the new 2023 USDA Income Limit here.
The USDA home loan is one of three that are considered “government-backed” loans. A government-backed loan is so-called because the lender is compensated for part or all of the loss should the lender be forced to foreclose on the property. With the USDA program, the lender is compensated at 100% of the loss. As with other government-backed loan programs, this compensation is financed with a form or mortgage insurance the borrowers pay.
The USDA guarantee has two forms of mortgage insurance, one that is rolled into the loan amount and one that is paid annually in monthly installments. The upfront fee that is rolled into the final loan was reduced late last year and is 1.% of the buyer’s loan amount. On a $200,000 loan, the upfront fee is $2,000 for a final loan amount of $202,000. The annual premium dropped from 0.50% to 0.35% and based on the final loan amount. On a $202,000 the annual fee would then be $707 paid in $59 per month installments.
As long as the property is located in an approved area and the borrowers meet the income limits this loan program can be used by anyone who can qualify based on credit, income, and sufficient cash to close. If you want to get more information, please call us at ph: 800-743-7556. We serve buyers nationwide including GA: Atlanta, Valdosta, Savannah, Columbus, Macon, Augusta, Thomasville