Whether you’re a first-time homebuyer or hoping to land a cheaper mortgage for your next residence, you’re probably looking for a more affordable home loan in Los Angeles. Buying a home is easily one of the most significant investments you’ll ever make, but it doesn’t mean you have to spend more than you should. Luckily, the USDA home loan can help you achieve your dream of being a homeowner, depending on your circumstances.
The loan was created by the U.S. Department of Agriculture as part of a national program to help supply loans for first-time homebuyers or individuals who don’t fulfill the standard mortgage requirements. You won’t have to give any downpayment for this mortgage, as it was designed for low- and moderate-income home buyers in rural areas.
Properties That Are Eligible for a USDA Loan
If you’d like to purchase a home with a USDA loan, it must be located in an eligible rural area. According to the USDA, these areas are “open country or any town, village, city, or place, including the immediate adjacent densely settled area, which is not part of or associated with an urban area.” If you’d like to find out if the home you’re looking at is eligible for the loan, you can verify it on the USDA website.
There are also population requirements that concern its eligibility, although it depends on the property’s characteristics. The maximum population limit for a USDA loan is 20,000; however, if you’re buying a property in a town with a smaller population within a metropolitan statistical area (MSA), you won’t qualify for the mortgage.
USDA Loan Eligibility Requirements (+ income requirements)
Like any other mortgage, the USDA loan has eligibility requirements that you must meet to take advantage of it. You must be a U.S. citizen or a permanent resident with a Green Card and have a good credit score, usually a minimum of 640. The property you’re buying must also be your primary residence. You must be in good standing with all federal programs, and you should be able to provide proof of on-time payments for things like utilities, car loans, or rent. The property must also be in an eligible area.
The USDA loan also has income requirements you must fulfill to be eligible. Since it was created to accommodate low- and moderate-income homebuyers, you cannot take the loan if you surpass the set income limits. The annual income limit is $90,350 for a one-to-four-person household in most eligible counties. If you belong to a five- to eight-member home, it jumps up to $119,200. The USDA establishes the limit at or below 115 percent of the median household income in each region, so you’ll have to check regularly to get the most updated information.
USDA Loan Fees in 2020
You’ll need to pay two fees in a USDA mortgage; the upfront guarantee fee and the annual fee. The lender must pay these fees, but they’ll eventually pass on the costs to you, the borrower. These fees allow the USDA to keep their loans subsidy-neutral, covering any losses instead of transferring the burden to taxpayer dollars. The costs can change annually depending on the program’s needs.
This fiscal year’s guarantee fee, beginning October 1, 2020, is 1 percent of the loan amount. You have the option to roll it into the mortgage instead of paying it out of pocket. Meanwhile, the annual fee for this fiscal year is 0.35 percent of the loan amount.
The excellent news about mortgages is that there are many options available to people of various backgrounds. The USDA loan is an especially attractive option for low- to moderate-income earners in rural areas, allowing them to get one step closer to achieving the American dream. Be sure to consult with a mortgage lender in Los Angeles to determine your eligibility for the loan.
If you’re looking for the best mortgage company in Los Angeles, you’ve come to the right place. Shannon Christenot is a mortgage broker with over two decades in the industry, helping customers with their home purchase or refinance needs. Whether you’re a traditional employee, self-employed, or shopping for your next home, be sure to contact me at (818) 602-2231 for mortgage help!