Funding Green Acres

This year, Caliber Home Loans, Inc. ("Caliber") has seen a growing desire by many Americans to move away from densely populated and expensive cities (thanks, COVID-19). Working and schooling from home has opened up possibilities for people to live virtually anywhere. One option is to relocate to areas within the U.S. that were formerly known as “rural.”

Given these trends, brokers should be familiar with mortgages backed by the United States Department of Agriculture (USDA). These loans are designed to encourage homeownership in qualified rural communities by offering low interest and low down payment mortgages to individuals with low to moderate incomes.

Eligibility and Requirements

1. The property must be in a qualified rural area. The USDA defines these areas as having a population of fewer than 35,000 residents. You will be surprised by how many areas in the United States are considered qualified rural areas. Check out this USDA tool to determine if the property you’re considering is eligible. Note: Ineligible area are small, few and far between.
2. Eligible borrowers are subject to a monthly income cap. It cannot exceed 15% of the median income in the community where they want to live.
3. The loan must be used to finance a primary residence. Investment or vacation properties are not allowed.
4. Borrowers must demonstrate an ability to repay. This may consist of a minimum credit score (usually 640, though this varies by lenders), a debt-to-income (DTI) ratio of less than 41%, and documentation of a steady job and/or income.

USDA loans have some great benefits.

You should consider recommending a USDA loan to eligible borrowers. Here is why:

Location: With a possible exodus of people from large cities, there may be an increasing market for prospective buyers looking to move to more rural locations. The USDA loan may become a handy tool as the housing market picks up even more coming into the spring season.

Interest rates: On average, USDA loan rates can be lower than most conventional loan rates by up to 0.5 or even 0.75%! The government protection behind these loans enables below-market interest rates.

Flexible terms: USDA loans may also permit a buyer to finance up to 100% of the purchase price. There are no down payment requirements, which allows you to serve borrowers who may not qualify for other conventional loans.

USDA loans aren’t for everyone.

Here are a few key tips to remember when recommending this type of loan:

• Be sure to confirm that the location is within a qualified rural area. Also, no businesses, investment properties, or secondary residences are eligible.
• Stay within income limits. Since the local median income varies by location, a borrower’s maximum income varies as well. It is always relative to the location of the desired property.

The USDA loan may be a lesser-known commodity, but as rural areas become more attractive, it may become more common. Caliber Home Loans, Inc. offers a wide variety of loan options, including USDA loans, so that we can truly meet the needs of all our borrowers. Helping others realize their dreams of homeownership is our daily passion. We live it, we breathe it, we work it. Partner with us today.

* Caliber Home Loans, Inc., 1525 S. Belt Line Rd Coppell, TX 75019 (NMLS #15622). Copyright © 2021. All Rights Reserved. Equal Housing Lender. For real estate and lending professionals only and not for distribution to consumers. Distribution to the general public is prohibited