USDA MORTGAGE LOANS

USDA Mortgage Loan

USDA mortgage loans are designed to help you buy in rural areas. Applicants must meet income limitations as defined by the area median income. The USDA mortgage loans are separated out to Direct and Guaranteed segments. Income limits will vary by segment.

You must have a reasonable credit history. The loan term is set for 30 years, and the interest rate will be competitive. The house also has to be in a defined area as eligible to lend for USDA purposes.

Put in a request today if you think you are buying in a potentially rural area!

Cool tidbits

Finance up to 100% of appraised value (include closing costs)
Guarantee fee can be financed
The annual fee amount is lower than FHA mortgage insurance
Payments compared to FHA loans may be roughly 10% less per month

Denver USDA Home Loans

Many Denver residents dream of buying their first homes, but worry about getting held back by the steep cost of a down payment. A USDA mortgage loan can make it easier for first-time homebuyers to attain their dream home by eliminating the down payment required by a traditional mortgage.

The Mortgage Maestro Group can serve as your USDA mortgage broker, helping you to navigate the requirements and process of obtaining a USDA home loan.

What Is a USDA Mortgage Loan?

USDA mortgages are designed to allow low-income homebuyers to purchase a house in a rural location with no down payment. USDA mortgages can be further divided into two main types: direct and guaranteed.

Direct Loans

Direct loans are directly backed by the United States Department of Agriculture (USDA) and are designed to meet the needs of low-income applicants. With the right subsidies, you can expect interest payments as low as 1%.

Guaranteed Loans

The USDA also guarantees mortgages issued by local lenders. This allows you to find low mortgage interest rates even if you can’t afford a down payment. If you put less than 20% down, however, you may still be required to pay a mortgage insurance premium in addition to your monthly premium.

USDA Mortgage Loans vs. Traditional Home Loans

How do USDA mortgages compare to traditional home loans? Here are three ways in which USDA home loans offer something you can’t find in a traditional mortgage.

Zero Down Payment

Most conventional mortgages require a 20% down payment. For many first-time homebuyers, this can be a significant barrier to homeownership.

A USDA mortgage loan can allow you to purchase a home with zero money down. While you’ll still need to cover closing costs, this allows low-income Denver residents to finance a home more easily than they could with a traditional mortgage.

Guarantee Fee

USDA mortgages come with what are called “guarantee fees.” This annual fee is added to your monthly mortgage payments.

You may be aware that FHA loans also require an annual fee. But USDA loans have guarantee fees that are significantly lower than those of FHA loans.

Different Purpose for Appraisals

Conventional loans and USDA mortgage loans require an appraisal by a third-party contractor. For conventional loans, the appraisal is designed to ensure the loan amount matches the assessed value of the home.

The appraisal process for USDA loans serves the same purpose but also ensures that the home meets the standards of the USDA. This means that it must meet basic criteria to qualify for a USDA loan. Items that may be covered are the heating system, condition of the roof, and windows.

Purchasing a home in a rural area won’t mean that you have to sacrifice quality for price. USDA home loan recipients are able to affordably finance their homes and enjoy the safety and security that they provide.

Qualifications for a USDA Mortgage Loan in Denver

Do you qualify for a USDA mortgage loan? Here are the requirements to be eligible for a USDA home loan. If you have any questions, feel free to reach out to us and we can help you understand the process.

Residency Requirements
USDA home loan applicants must be one of the following:

A legal U.S. citizen
A noncitizen national
A permanent resident alien
Denver residents should ensure they have the appropriate legal status before applying for a USDA mortgage loan.

Rural Location
USDA mortgages are specifically reserved for homes in rural areas or at the very edge of suburbia.

If you have any questions about which areas are covered by the USDA mortgage program, you can use their convenient map tool. Once you accept the disclaimer, you can type in the home’s address to receive information about the home’s eligibility.

Credit History
Applicants will need to have a credit score of 640 or above to qualify for a USDA loan. Additionally, applicants should have no accounts sent to collections in the last 12 months.

If your score falls below 640, you may still qualify for a USDA home loan, and we can discuss options for underwriting your mortgage. For example, some applicants may be able to submit a “nontraditional” credit history that includes past utility and rental payments.

Income Requirements
USDA mortgages are reserved for those whose low income would otherwise prevent them from obtaining traditional mortgages and making a 20% down payment.

To qualify, your income must not exceed 115% of the median income in the area. You should also have dependable income for at least 24 months prior to applying for the USDA loan.

At the same time, you’ll be asked to show that you have stable income and can make your mortgage payments for at least 12 full months. This means that you’ll be asked to evaluate your assets, savings, and current income to ensure you can meet these requirements.

The final monthly payment cannot exceed 29% of your monthly income. This payment includes your mortgage principal, interest payments, insurance, and taxes.

Additional monthly debts cannot exceed 41% of your income, though the USDA may consider higher debt ratios if your credit score exceeds 680.

Is a USDA Mortgage Loan Right for Me?

Not every Denver-area home will qualify for a USDA mortgage loan, nor will every homebuyer meet the income requirements for these loans.

But if you’re struggling to come up with the 20% down payment needed for a traditional mortgage, you might consider buying a home with a USDA home loan. This may mean that you’ll need to find a home located in a rural setting. However, it can also help you to purchase your first home more quickly and easily than you’d ever imagined.

Where Can I Find a USDA Mortgage Broker Near Me?

Denver residents can depend on the Mortgage Maestro Group for their financing needs.

Our mortgage experts have decades of combined experience, which means that we can serve as your USDA mortgage broker when you’re ready to purchase your first home.

To learn more about the process to obtain a USDA mortgage, contact us today. We can make the process of house-hunting simpler and easier, turning your dream home into a reality.