Section 4: USDA First-Time Homebuyers
Purchasing Your First Home
Purchasing a first home is an exciting milestone in any person's life. For some, the process may also seem very intimidating. Buying a home can be challenging for a first timer. After all, there are so many steps, tasks, and requirements, and you may be anxious about making an expensive mistake. But first-time homebuyers actually enjoy some special advantages created to encourage new entrants into the real estate market. Please don't hesitate to give us a call or start your quote online.
How Much Home Can I Afford?
Typically, the first question would-be homebuyers ask themselves is, "What can I afford?" There are many factors that determine what a reasonable mortgage payment should be for an individual, including annual income, existing debt payments, down payment (if any), as well as additional costs like homeowners’ insurance and housing association fees. Orbit Home loans provides a handy VA Loan Payment Calculator to help homebuyers find a monthly payment that's comfortable for them.
USDA Payment Calculator →
Contact an Orbit Home Loan Professional
What Type of Loan Should I Get?
There are many financing options available for homebuyers out there, each with their own unique advantages. For most borrowers, we at Orbit Home Loans highly recommend the working with one of our loan officers to find out what best fits your needs. Of course, if you are still researching then you can continue to explore our many loan options here on our website.
Advantages of a USDA:
1. Flexible Credit Guidelines
Most conventional lenders look for a credit score of at least 640, however you'll need something closer to 720 to qualify for the lowest interest rates. Luckily, there is no minimum credit score for USDA loans, however you need a score of 640 or higher to qualify to use the USDA's automated underwriting system. Borrowers with lower credit scores can still qualify for USDA loans using manual underwriting.
2. Down Payment
Of the many advantages, the most cited is the ability to obtain 100 percent financing without having to spend years saving for a down payment. Along with VA loans, this government-backed loan option is one of the last remaining $0 down payment mortgage options out there.
4. Private Mortgage Insurance (PMI)
With a conventional loan, lenders require you to pay "private mortgage insurance" (PMI) if you don't come up with a 20 percent down payment. FHA loans also have high annual mortgage insurance fees.
USDA loans, on the other hand, don't have PMI. Instead the USDA uses two fees: an upfront guarantee fee that is paid once when you close on the loan, and an annual fee, which gets lumped into your monthly mortgage payment. The upfront fee is 1 percent of the total financed amount while the annual fee is 0.35 percent of the loan's current balance.
3. Competitive Interest Rates
Due to the USDA guarantee, lenders are able to offer some of the lowest interest rates on the market. While actual rates will vary by lender due to other contributing factors, know that your credit profile and current market conditions play a vital role in your mortgage rate.
4. Lifetime Benefit
While this benefit only applies in certain circumstances, it is possible to own additional property and apply for a USDA loan. The main thing to keep in mind is that the other property cannot be financed by a previous USDA loan. USDA loans get you into one of the best loans which you will be able to use and benefit from for the rest of your life.
5. Loan Limit
Loam limits will be determined by your county. To find out more information please reach out to your lender (CLICK)
6. Funding Fee
USDA loans have the lowest funding fee of all government-backed loan products. 1% Upfront Funding Fee 0.35% Annual Fee . Funding Fee
The maximum amount you can be charged for a USDA guarantee fee is 3.5% of the loan value. In 2019 this fee is set at 1% and is calculated based on the loan amount.
7. Assumability
If you're wondering if USDA loans are assumable, the answer is often yes. USDA loan assumption can make a lot of sense, particularly in a high interest rate environment, provided you qualify and that it makes financial sense for your personal situation.
Getting Preapproved
The first step toward securing your loan is getting pre-approved. This involves a prequalification process, where a loan officer assesses the homebuyer's financial situation and determines what they qualify for and is followed by the homebuyer submitting a completed loan application to the lender for approval. Orbit Home Loans offers two ways to begin this process: You may either call us directly or reach start the application below to get a complementary call.
Contact an Orbit Home Loan Professional
Finding a Real Estate Agent
When using a USDA, it's important to find a real estate agent that not only knows the intricacies of the USDA Benefit Program, but also understands the specific needs of borrower. Orbit Home Loans has put together a network of friendly real estate agents for just this purpose.
Learn More about Orbit Realty →
Helpful Resources
- The Guide to USDA Homebuying
Browse our VA homebuyer education and resources page. - USDA Home Loan Mortgage Payment Calculator
This free VA Home Loan calculator gives you a snapshot of what your monthly payments could be with a VA Loan. - USDA Glossary
Use our glossary to reference any unfamiliar terms or acronyms.
As a first-time homebuyer, you have many options when it comes to purchasing your home - including homes in high-cost areas.