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What is a USDA Loan & Should You Get One?

June 17, 2020 by Shannon Christenot

Why Should You Opt to Get a USDA Loan?

For most first-time homeowners-to-be, the most difficult and painstaking process is applying for a housing loan. While most homes look flexible on paper, what throws people off are high rates for the down payment. For most people, they can afford to pay the monthly mortgage but are driven away by the upfront costs for the home.

While services such as VA loans cover down payment dues, for the most part, they are only available to those in service or veterans. However, an alternative exists for those who are looking for a nice place to live without requiring to be a combat veteran to avoid the upfront down payment costs. With USDA loans, you can secure a dream home with minimal requirements. Here’s what you need to know about it and why you should opt for a loan like this:

What Is A USDA Loan?

These loans are guaranteed by the United States Department of Agriculture, with the goal of providing affordable financing for homes in rural areas or suburbs. Let’s face it, living in the bustling cities with all the high rises screams extremely high real estate prices.

This is usually an unrealistic option for most first-time home buyers, as the prices for even just an apartment or a studio can be through the roof. With the big cities like San Francisco and New York City having prices that are insane depending on the districts you find yourself in, perhaps you will want to consider other options.

Why You Will Want to Secure A USDA Loan?

With a 0% down payment, you can use the excess money for other things such as home improvements, furniture, or even to start a business or invest. Although there are housing loans out there with low down payment rates, no is better than low. Additionally, you can get a house you dream of rather than being confined to a small space in an urban environment, which is a plus.

Another thing that makes these loans so attractive is that they often have lower loan costs. For example, let’s compare an FHA loan with a USDA one. For a $200,000 loan amount, FHA requires an upfront insurance premium that is 1.75% the amount, which is roughly $3,500 at closing or included in the loan balance. Additionally, there is an annual premium based on the equity amount, so if the down payment came out to 3.5%, the annual premium is 0.85%. That premium is an extra $140 dollars per month.

A USDA loan has an upfront guarantee of 1% of the loan amount, which is $2,000 at closing, or rolled into the loan. The annual guarantee comes out to 0.35% of the average unpaid principal balance each year. The initial premium would amount to around $60 per month, with a steady decrease each month as you work to pay the loan off.

With all this math, the basic thing you can take away from it is that USDA loans mean lower monthly payments for your house.

What Are Some of The Qualifications for A USDA Loan?

Like any loan, maintaining a good debt-to-income ratio is important, with a higher score making it easier to obtain loans. USDA loans are given to those who have a score of 640 or higher on the FICO scale. Having reserve income set aside to cover your payment in case of emergencies like job losses will help you obtain a loan as well.

USDA loans are designed to aid with home development for affordable housing in rural areas, and with most states having suburban areas readily available to live in, you are fortunate. When it comes to these loans, the adults in a household cannot be making more than 115% of the median income in the area.

Shannon Christenot for USDA Loans in Los Angeles

When it comes to owning your own home, a nice way to start is to apply for a USDA loan and live in the suburbs or in a rural area. These loans are a good way to save a lot of money and continue to have a spacious dream property in a peaceful and tranquil area.

I am Shannon Christenot and I am one of the top mortgage brokers in Los Angeles. I can assist you in finding the right home loans for you. Contact me at (818) 601-2231 to get pre-approved for a loan today!

Filed Under: USDA Tagged With: California, Los Angeles, USDA Loan Tips

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I cannot recommend Shannon highly enough! As an independent contractor, I knew getting a mortgage would be a little difficult, and Shannon supported me and helped make it work every step of the way. If I ever need brokerage services again, she'll be my first call!read more
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We’ve worked with Shannon and her team twice and both experiences were stellar. The first was buying our first home and she walked us through the process and explained everything along the way to help us get quickly up to speed. The second time we were going for a refi in maybe the most turbulent mortgage market ever as COVID hit. She guided us through all the hurdles and worked double time to satisfy all the lenders new requests. We got a rate a full percent lower. I can’t recommend this team highly enough.read more
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Shannon Christenot is the most amazing lender we’ve ever had. As a matter of fact this is the second time we’ve used Shannon to do a mortgage with us. She held our hand every step of the way. She made the whole process stress-free as well. And when we were coming down to the wire to finish our escrow within the 30 days she got us an extension Without even asking. Now we are locked into a very low rate. We’ve saved hundreds of dollars per month for the next 30 years. We cannot Thank Shannon enough. I would recommend Shanon to anyone thinking of buying a home or refinancing.read more
Tony Bilby
Tony Bilby
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Shannon and her team were professional, competent, and swift when it came to the lending associated with my home purchase. We were able to get the loan approved and close on a house in less than 30 days. Record time!read more
Joshua Barton
Joshua Barton
16:05 23 Nov 19
I have had the pleasure of working with Shannon for 8 years - her knowledge of the mortgage process and attention to clients is unparalleled. The Los Angeles market can be tricky with high dollar homes and unique income of the Entertainment Industry, but Shannon takes charge and leads everyone through to successful closings like clock work - cannot recommend her enough a true Rock Star in Mortgage world.read more
Lauren S
Lauren S
04:52 18 Oct 19
Working with Shannon was a real pleasure. She was always available and got back to me promptly with any necessary information. I was able to refinance my mortgage at a rate considerably lower than another larger company quoted who I had started working with. I look forward to working with Shannon again and I highly recommend her to anyone looking for a competent and decent mortgage broker.read more
Mike White
Mike White
02:15 27 Sep 19
As first time home buyers we had no idea what we were doing. We were pre-approved by a well known company but quickly discovered that we absolutely did not want to work with them for the actual mortgage. Shannon was recommended to us by a friend and I called on a Saturday morning. By Saturday evening we were well on our way to buying a house (we closed three days ago!). Shannon made navigating these foreign waters so easy, answering all of our newbie questions with patience and grace. Plus she got us a fantastic rate. We are so grateful for Shannon and can not recommend her enough. WE OWN A HOME!!read more
Alaine Smith
Alaine Smith
13:15 26 Sep 19
It was wonderful working with Shannon! She is attentive, thorough, and intelligent. It was easy to communicate with her because she took time to hear and understand my goals and always responded quickly. I highly recommend her to anyone looking. The customer service she provides exceeds expectations by a long shot! Thank you, Shannon, for all your help!read more
Julie Mckay
Julie Mckay
17:20 28 Aug 19
I just purchased my first home! Shannon and her team were truly a dream to work with. I was never left in the dark and she was always quick to respond with all of my questions. My experience couldn't have been easier. I highly recommend Shannon and would use her again in a heartbeat! She is the BEST!read more
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jojo quijada
19:55 27 Aug 19
I've been in the real estate business for over 5 years now, and I always trust Shannon to work with my clients. She and Josh are an AMAZING TEAM! Buyers love to work with Shannon as she gets things done asap and answer any and every question/concern. I couldn't recommend a better person for lending. Can't thank her enough!!read more
Rotimi Ayanbeku
Rotimi Ayanbeku
20:12 15 Aug 19
I always go back to Shannon because she is one of the best in the business! I've worked with Shannon over the years, however, she outdid herself in my last deal. She was so professional, caring and effective that my clients were comparing everyone else in the deal to Shannon. More importantly, we were ready to fund in less than two weeks. Once again, Shannon affirmed my belief in her that she always rises to the occasion. Thank you for being the best!read more
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