8 Things You Didn't Know About The 100% USDA Mortgage

1. USDA Mortgages Can Be No-Money-Down

USDA mortgages require no down payment and no money down. When you buy a house and use a USDA mortgage to finance it, you can literally close with no cash whatsoever — even your closing costs can be included.

2. USDA Interest Rates Are The Lowest

When you get a USDA loan, the U.S. Department of Agriculture sort of co-signs on your mortgage, guaranteeing to your lender that your payments will be made. Banks feel great knowing they won’t lose money on your mortgage, so they offer up low interest rates because they can.

3. USDA Loans Allow Down Payment Gifting

USDA mortgages allow for 100% financing, but you don’t have to do no-money-down. You can make a down payment when you finance via the USDA, and that down payment is allowed to come from a charitable organization if you want, or a parent or grandparent, or another family member.

4. USDA Mortgages Are Fixed-Rate Only

There are only two types of USDA mortgages — 15-year fixed-rate loans and 30-year fixed-rate loans. There are no adjustable-rate mortgages (ARM) available to home buyers through the U.S. Department of Agriculture’s loan program.

5. Buyers Can Finance $27,500 In Home Improvements With A USDA Loan

USDA loans allow buyers to borrow 100% of a home’s purchase price, plus another $27,500 on top of that for repairs and home improvement. Allowable repairs include replacing a roof; remodeling for accessibility of handicap persons; and, for making energy-efficiency improvements to a house.

6. USDA Mortgages Are Easy To Refinance

Should mortgage rates drop in the future, homeowners with USDA home loans can refinance quickly and easily through the USDA Streamline Refinance. To get approved, you only have to show that you’ve paid your mortgage on time for the last 12 months; and, that the refinance will lower your payment by $50 per month.

7. USDA Mortgages Allow Below-Average Credit Rating

The USDA’s official mortgage rulebook says that home buyers must have a credit score of 640 to get approved; but, it will approve home loans for buyers with credit scores below 640, and for buyers with no credit score at all, on a case-by-case basis.

8. USDA Loans Can Be Assumed By Somebody Else

USDA mortgages are assumable, which means they can be passed along to future buyers of your house– with your same interest rate. Imagine 5 years from now, selling your house with its current mortgage rate intact. Your home could be easier to see because of its already-low mortgage rate.

Dan Green

Dan Green is a former mortgage loan officer and an industry expert. He's appeared on NPR and CNBC, and in The Wall Street Journal, Bloomberg, and dozens of local newspapers. Dan has helped millions of first-time home buyers get educated on mortgages, real estate, and personal finance. Have mortgage questions? Ask Dan in the chat.

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