What is an USDA mortgage loan?

USDA Loans or US Department of Agriculture Loans are offered on the purchase of properties located in rural areas of the country. USDA Loans, which are also known as “USDA Home Loans”, “Rural Housing Loans”, or “Section 502 Loans”, are offered to eligible rural and suburban home buyers who are looking for a no-money down, 100 percent mortgage financing for their primary homes. 

USDA loans are insured by the US Department of Agriculture and are best-known for their ‘no-money down’ financing feature. These are designed to help low to moderate income households purchase a home in a USDA-specified rural area. The USDA Home Loan Program offers 100 percent financing for all approved submittals, and besides VA Loans, it is the only loan program in the US that requires no down payment.

Must Read: San Diego Mortgage Loans - Rates, Terms, Limits

When it comes to loan limits, the limits are usually outlined somewhere that people are easily able to see and understand.

The USDA loan limits are a little bit different when it comes to what they will pay.

There are two loan types that are about the purchase of homes and the loan for home improvement.

The two loans that cover the purchase of a home follow a different set of limits while the home improvement loan has a hard ceiling of $27,500.

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The reason for the harder limit is that the home improvement loan is supposed to ensure that people can make the kind of improvements that make sure that a home is habitable.

However, if you like the sound of these loan limits, then I would suggest checking out our information about the USDA mortgage loan, our question and answer about the loan, our pros and cons about the loan, or contact me to see what you might be able to do with a USDA loan or if it’s perfect for you.

For now, we’ll discuss the loan limits to help you get a little more familiar with the USDA mortgage loan.

What Makes USDA Loan Limits Different

San Diego USDA Mortgage Loan Limits (2019 | 2020 Update)

While most conventional loans, the FHA loan, and the VA loan follow a specific set of guidelines about the loan limits, the USDA loan limits don’t follow the exact structure of the other loan types and their limits.

This is because of some key differences in the loan type.

While other loans allow for the purchase of homes that are multiple units, the USDA loan actually doesn’t allow for that kind of purchase.

They want to encourage people to get a home, but they aren’t offering a future investment or rental income.

Because of this limitation, they don’t follow the loan limits of other loans.

Instead of having the ceiling of $417,000 like other loans, they instead look at your debt-to-income ratio to determine how much you will be able to afford.

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The maximum, then, is going to be 100 percent of the appraised value of the home plus the 2 percent guarantee fee that is usually required by the USDA loan program.

The reason why they don’t have a harder limit ceiling is because of the requirements that they have for the home.

Instead of limiting you to a number amount, they look at the home instead.

The homes that the USDA will allow you to get are in certain areas and they are going to be ‘modest’ in order to qualify for the USDA loan program.

The areas that these homes are allowed to be in are named rural by the USDA, however, that definition is a little bit loose.

You will have to look at the USDA guidelines to really figure out whether the area and home you are looking at fit what the USDA wants.

However, with that extra work and that extra looking, you will be able to find a pretty good home and mortgage loan that you won’t have a down payment for.

Check Now: See What Your San Diego USDA Rate Is

Conclusion

Buying home can be a lot of stress, especially when you have a little bit more debt than others out there.

However, the USDA loan is meant to help people that need a more stable home find that home.

Because the definition of rural is loose and the loan limit is dependent upon the person and the house that they are looking, the loan is a little bit easier to deal with.

Instead of looking at a hard and fast loan limit, you will be a little bit freer to look at a home that really fits your needs and will provide you with a better standard of life than what you are living in now.

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If you are struggling with figuring out the specifics of the loan limits or whether or not you qualify for this loan type, then I would suggest that you contact me.

I will be able to run through the information with you and help you look for a home in an area of San Diego that will really fit most of your criteria.

The USDA loan type can really be very useful for people that are struggling to put away money to save for their future, but with a little help, you’ll be on your way to a better future.

What do you think?

Leave your comments below – or text/call me at (760) 297-4539

Your USDA Mortgage Insider, 

Scott

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