USDA Guaranteed Loans are mortgages offered by lenders. The U.S. Department of Agriculture guarantees these mortgages to encourage homeownership in less densely populated areas of the country. The USDA acts as the guarantor for the mortgage, and a lender issues you the loan.
The property you’re purchasing must fall within approved rural areas to qualify for a USDA loan. Despite the program’s reputation for serving primarily rural areas, 97% of the US land mass is eligible for USDA financing. While you can’t buy in an urban area with a USDA loan, chances are there are properties near you that qualify. To see whether the home you’d like to buy is eligible, search here. Why don’t we just list the eligible areas? Eligible areas in Hawaii include: On Oahu – Waikele, pockets of Royal Kunia and Village Park, Ewa Beach up to Makaha, Waipio Acres, Whitmore Village, North Shore down to Haiku Road in Kaneohe and the Town of Waimanalo. Neighbor Islands – all islands are USDA eligible except for Hilo on the Big Island.
Mortgage insurance for USDA loans is less expensive than it is for competing loan products, like conventional or FHA mortgages. The USDA requires a Guaranty Fee of 1.00% of the loan amount, and a monthly mortgage insurance fee of 0.35% of the loan balance. For example, if the home you are purchasing costs $500,000, you’ll owe $5,050 upfront (there is a slight fee charged by USDA when you finance the Guaranty Fee in your loan) and $145.83 per month.
Lenders may have their own internal guidelines and requirements in addition to those set by the USDA’s Rural Development program.
This is your first step to see how you can qualify for a no down payment and low Private mortgage insurance USDA loan. We will be here to guide you through the loan process.