The key to getting the best USDA mortgage interest rate is knowing if you and your home are eligible and comparing the interest rates and fees of lenders.
Buy a country house? Loans from the US Department of Agriculture offer a combination of interest rates and fees that can outperform traditional loans and even loans insured by the Federal Housing Administration (FHA).
USDA loans are intended for regular borrowers and new borrowers in low and middle-income rural areas. They allow borrowers to buy homes without a down payment. Bonus: the government definition of “rural” includes suburbs in some places.
How a USDA Loan Can Save You Money
The USDA mortgage program is one of the few that can offer you 100% financing on a home.
Lower USDA warranty fees mean lower rates.
You pay a guarantee fee on a USDA loan whether or not you make a down payment. There are upfront fees that are paid on completion and other fees that are paid monthly for the life of the loan. Guarantee fees are paid instead of mortgage insurance.
r than FHA or private mortgage insurance. Lower fees mean lower interest rates.
If you’re buying a country home, here’s how to get the best combination of USDA mortgage rates and fees.
1. Find out if you and your home are eligible for a USDA loan.
USDA loans are intended for owner-occupied single-family homes in rural areas. The department has a rural property finder that allows you to enter an address to see if the home is eligible for a USDA loan.
Manufactured homes, also known as mobile homes, are eligible if they are new, the owner owns the property, the house is permanent, and taxed as real property rather than personal property. Eligibility for manufactured homes that are not new is limited.
The USDA sets limits on the household income of borrowers. Income limits vary by district and metropolitan area. There are two ways to find income limits:
A questionnaire asking for a location, household size, and income.
A PDF file with a clickable map on the first page that links directly to your report
2. Make sure your credit reports are correct
Before applying for a mortgage, check the accuracy of your credit reports. Lenders check your credit records when deciding whether or not to grant a mortgage. You can request a free credit report every year from the three major credit reporting agencies. If you find any inaccuracies, here’s how to dispute credit report errors.
There is no minimum credit score for USDA loans, but the underwriting process is automated if you have a credit score of 640 or higher.
The accuracy of your credit reports is also important because your creditworthiness is based on this information. While there is no minimum credit score for USDA loans, the underwriting process is automated when you have a credit score of 640 or higher. In addition, the lowest USDA loan rates are given to borrowers with high credit scores.
3. Compare the interest rates on the three types of USDA loans.
USDA rural development loans are of three types: Secured loans. With a USDA secured loan, you get a mortgage from a private lender. The USDA guarantees the loan and protects the lender from the loss of a package if you fail to meet your obligations.
Direct loans. With a USDA Direct Loan, the federal government subsidizes your monthly payment as long as your income remains at or below the region’s low-income cutoff. These loans are low and very low for borrowers