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The staff at Citywide Housing Services, prides itself on being an important source for Landlords, Tenants, Buyers and Sellers to find real estate solutions online.
What Are USDA Loans
USDA Home Loans or Section 502 Loans, officially known as the Rural Development Development Guaranteed Housing Loan Program was created by the United States Department of Agriculture (USDA) to encourage private institutions to lend to borrowers in certain rural communities. USDA does not give loans directly. Instead, loans are insured to protect lenders against losses and default. The program is best know for offering qualified buyers 100% (no money down) financing. There are no loan limits but the home must be located in a rural area. While, being a very helpful program, USDA loans are only offered in certain areas. To check if your future home is located in an approved USDA area, Learn More.
Mortgage Insurance Premiums
Similar to the FHA program, USDA Loans are partially funded by the borrowers in the form of Mortgage Insurance Premiums. The fund requires 2 types of Mortgage Insurance Premiums to be paid on all loan products. These fees, paid by the borrower is required when less than 20% of the purchase price is put down as a downpayment. To encourage banks to lend, USDA guarantees a percentage of the loan will be insured if the borrower ever defaults. Premiums are collected in the forms of Upfront Mortgage Insurance Premium and Annual Mortgage Insurance Premium.
Upfront Mortgage Insurance Premium (UFMIP) is calculated for purchases and refinances at 2.00% of the loan amount. For example, if the USDA mortgage loan is $200,000, the UFMIP would be $200,000 x 2.00%, or $4,000. This amount is automatically added to your loan. The final loan amount for a $200,000 loan, would be $204,000.
Annual Mortgage Insurance Premium (AMIP), the 2nd type of USDA Mortgage premium is calculated annually and paid in 12 monthly installments with your mortgage payment. It is calculated at 0.4% of the remaining loan balance.
The decision to apply for a USDA Loan starts with you. Our USDA Loan Calculator will help you to calculate the math and at least get an accurate range of what to expect for payment if you purchase a home using the USDA Loan product. Any questions about the USDA loan process, an approved USDA lending institution, or to find a home using the USDA product can be forwarded to 914-299-0420.