What is a USDA Mortgage?

A USDA mortgage loan is a mortgage loan which is offered to rural property owners by the United States Department of Agriculture.

What are some of the requirements for a USDA mortgage?

  • Home being purchased must be in a rural area as defined by the USDA. Current areas within Maricopa County which are considered eligible for USDA financing are Anthem, Buckeye, San Tan Valley, and Queen Creek to name a few. To find out if a home you are considering buying is in a USDA eligible area, please contact us for a free mortgage consultation. The home being purchased must be owner-occupied; investment properties and 2nd Homes are not allowed.
  • The minimum FICO score for a USDA mortgage loan is 640.
  • The borrower’s adjustable household income cannot exceed the maximum allowable income limit set by Rural Development. The eligibility income includes the gross income for the applicant, co-applicant, and all other adults in the household. All adult members that are not on the loan application must provide verification of their employment/income (most recent paystub with YTD figure).
  • If you have had a previous foreclosure you must wait 3 years in order to obtain a USDA mortgage loan.
  • If you have had a prior short sale the amount of time you must wait to obtain a USDA mortgage loan is 3 years (36 months).
  • If you have had a prior Chapter 7 Bankruptcy you must wait 3 years before obtaining a USDA mortgage loan as opposed to the 2 year seasoning requirement for an FHA mortgage loan.
  • If you have had a prior Chapter 13 Bankruptcy you must be able to provide documentation that 12 months of the repayment period has elapsed under the plan with all payments made on time. In addition, the borrower must receive written permission from the bankruptcy court/trustee or counseling agency to enter into a mortgage transaction.

What are the USDA mortgage insurance amounts?

The up-front mortgage insurance premium for USDA mortgage loans is 2% of the total loan amount. This mortgage insurance premium can be rolled into the total amount of your mortgage. The monthly mortgage insurance component is .40% of the loan amount and is calculated by multiplying the loan amount by .0040 and then dividing by 12. So for a $150,000 loan amount the up-front mortgage insurance premium would be $3,000 ($150,000 X .02), and the monthly mortgage insurance premium would be $50 ($150,000 x .004 / 12).