Home Loans California & Arizona

How does the USDA home loan work in California | No Money fo the Down Payment

August 17th, 2018 3:50 PM by Nathan Rufty

USDA Loans California

California USDA Loans are becoming one of the most popular loan types in today's mortgage market because of the favorable terms that they offer to home buyers in California. USDA stands for United States Department of Agriculture but USDA loans are used for much more than just farm loans. A USDA mortgage loan in California might be right for you if you want to buy a home with no down payment or mortgage insurance. If you're unsure about your credit rating, or have concerns about a down payment, USDA mortgage loans can accommodate your circumstances with super low closing costs and no MI.

There are two types of USDA home loans that are commonly available for home purchases today. The first and most common type of loan is the USDA Guaranteed Rural Housing Program. USDA Guaranteed Loans allow for higher income limits and 100% financing for home purchases. USDA Guaranteed Loan applicants may have an income of up to 115% of the median household income for the area and all USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.

Financing a home is an ever-changing scenario. If you are in the market to purchase a new home, it is important to be aware of all of your options in financing. Many people are unaware of USDA home loans. USDA loans have helped many families and individuals purchase the home of their dreams, where they otherwise would not have had the opportunity to do so.

What is a USDA home loan in California? 

Contrary to what many Californians are led to believe, USDA loans for home purchases can be utilized to buy exurban and suburban homes all over California, and are not just for purchasing farms. They are also known as Rural Housing Loans, or Section 502 Loans. In order to qualify for this type of a loan, the home must be located in certain areas of the nation and the buyers must meet income eligibility requirements. This type of money loaning program is meant to increase the development of rural areas of the country.

The USDA home loan program is one of the best-kept secrets in the home buying market today. This zero-down, 100% financing home loan is sponsored by the United States Department of Agriculture to promote homeownership in less-dense communities across the U.S. For this reason, it’s often known as the USDA Rural Development Loan (RD Loan) or Rural Housing Loan. The program is part of the larger Rural Housing Service under USDA’s umbrella of programs. But don’t let the name fool you. It’s not just for properties that are far-removed from civilization. In fact, a full 97% of U.S. land mass is eligible for USDA financing, representing 109 million people — about one-third of the U.S. population. It’s very likely that a property near you qualifies.

usda loans in california

Benefits of a USDA Loan in California

California USDA loans are very beneficial with their low interest rates and no down payment programs. They are one of the only current programs that offer 100% financing on loans for home buyers. Some home repairs and improvements may also be eligible to be added to the total loan, making this an even more attractive financing option for many home buyers. Other advantages include much cheaper mortgage insurance fees at just 0.04 percent, which does not change based on the size of the down payment. There is also no specific limitation as to the amount that can be loaned, so potentially many home buyers can have more purchasing power with a USDA loan over a conventional private home loan.

Eligibility 

In order to qualify for this type of a home loan you must first be purchasing a home in a USDA-eligible area. Surprisingly, there are many areas of the country that qualify, such as areas in California, the Midwest and even in New Jersey. Second, the household income cannot be over 115 percent of that area's median income.

Am I eligible for a USDA home loan?
There are two main factors for USDA home loan eligibility: the property and the home buyer. USDA property eligibility & USDA buyer eligibility. The home must be located within a USDA-eligible area. The USDA website contains interactive maps with which you can pinpoint an address or take a wider view of a region. The lender will verify USDA rural development loan eligibility in the same way as for any other home loan program. Your credit, income, and bank account information will be compared to current guidelines for USDA loans.

Other Details about the USDA Loan

Loan Terms:  Available in 30-year and 15-year fixed rate mortgage options. Fixed rates are the most time-tested and safe for home buyers, therefore adjustable-rate loans are not available.

USDA guarantee: The name — USDA guarantee loan — does not mean mortgage approval for all applicants is certain. It means that the United States Department of Agriculture backs the lender for properties in designated rural areas. If the borrower can’t pay for some reason, USDA will reimburse the lender monies lost. This insurance helps lenders approve loans with zero down at very low mortgage rates: the guarantee removes much of the risk.

Affordability: One of the most affordable mortgage products available today. The combination of low rates, low mortgage insurance fees, and zero down makes it the most widely-available ultra-affordable loan.

USDA refinance: You can use USDA to refinance if you have a USDA mortgage currently. In fact, you might not even need to provide current income documentation or an appraisal. Read more about USDA refinancing here.

For more information about USDA loans in California please contact Nathan Rufty at: (909) 503-5600

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