What is a USDA loan?
US Department of Agriculture (USDA) or Rural Development (RD) Loans are an excellent product for those living in a “rural” area. Good news! Almost all of Montana is still considered rural. This is another great program that we can help you use to take advantage of its amazing benefits. Rural Development loans are guaranteed by the USDA, allowing lenders to offer extremely competitive terms.
Some USDA highlights are:
- 0% Down
- Lower interest rates compared to conventional lending
- Fixed mortgage insurance rates that are half as costly as FHA loans
- Low funding fees
- 0% down construction loans
- Streamlined refinances
The Rural Development program is funded in-part by mandatory mortgage insurance. There is a 1% upfront fee that can be financed into the loan + a yearly fee of .35% of the loan amount paid monthly with your normal mortgage payment. These fees are much lower compared to an FHA loan.
You can only have one USDA loan and you must occupy the property. Unlike other government programs, if you move out of the property, you must refinance the loan out of the USDA program.
While there is no loan amount limit, there are max income and net worth limits per household. The program is aimed at helping low-to-moderate income families who wish to purchase a home in a rural part of the country.
How we can help you secure your USDA loan in Whitefish, Kalispell or the greater Flathead Valley
RD loans have much stricter income guidelines that can throw many new loan officers for a loop. There are many nuances to the program and it is important to have a trusted, experienced advisor when attempting to secure USDA financing.
Even if there is only one person listed as the borrower, underwriters will look at the total household income. This includes teenagers with part-time jobs, non-borrowing spouses, grandma’s social security, and even roommates.
As with other government programs, USDA requires higher minimum property standards. We help vet out properties before putting in offers to make sure they will pass USDA inspection.
Do I Qualify?
To determine if you qualify, lenders review your total monthly debt (proposed housing payment + regular monthly debt) as a percentage of your total gross monthly income. The acceptable percentage (DTI) will vary depending upon the specific loan program for which you apply.