Purchase a home with no down payment and potentially no closing costs with a USDA loan in Ventura County, California.
What is a USDA Loan?
A USDA loan is a no down payment required; government backed loan program that allows borrowers to purchase a primary residence in an eligible rural area. Borrowers must meet the moderate-income limit and meet the Single-Family Housing Guaranteed Loan Program guidelines.
What type of properties are eligible?
Single-Family homes including PUD’s, Condo’s, Modular, and some Manufactured Homes. You might be surprised how many homes are in an eligible area in Ventura County. We’ve closed loans in Fillmore and Piru, for example, where we helped borrowers save thousands of dollars on their purchase. You can check if a property you are interested in is in an eligible area by going to the USDA website. See link below.
What are the program terms and fees?
USDA Loans are 30 Year Fixed Rate Mortgages. There is an upfront Guarantee Fee of 1%, which can be included in your loan amount. There is also an Annual Guarantee Fee of .35% of the unpaid principal balance and charged monthly with your mortgage.
What is the maximum loan amount?
You can finance up to 100% of the property’s appraised value, plus the 1% Guarantee Fee. This means you may be able to include some or all your closing costs in the loan amount to limit or avoid out-of-pocket costs if the property value exceeds the sales price. can increase the loan amount to cover closing costs up to 100% of the value. All other loan programs lend only on the lesser of the sales price or value so you could not include closing costs. That’s a huge benefit!
What are some primary requirements?
- Applicants must be U.S. Citizen or Permanent Resident Alien.
- Applicants may not be delinquent on a federal loan.
- The combined annual income of all adult household members may not exceed the maximum moderate-income limit for the county. Even if adult members in your household will not be on the loan, their income is still included. This is a separate calculation from the qualifying income used.
- Income must be stable and dependable for repayment.
- Must be unable to obtain conventional financing without mortgage insurance. In other words, you would be ineligible for a USDA loan if you are able to put 20% down plus closing costs and you meet the debt-to-income ratio requirements.
- This program is not limited to first time homebuyers, so you are still eligible if you previously owned your own home.
Comparison
A similar program to compare would be an FHA loan. Here’s a comparison between an FHA and a USDA loan.
Purchase Price of $700,000.
USDA’s Maximum Income Limit for a household of 4 in Ventura County is $148,700.
| Assume 680 Fico | FHA | USDA |
|---|---|---|
| Base Loan | $675,500 | $700.000 |
| +Upfront MI/Fee | $11,821 | 7,070 |
| Total Loan Amount | $687,321 | $707,071 |
FHA has a higher upfront and monthly MI fee vs a USDA loan and would require 3.5% down payment.
| Pricing as of 3/17/23 | FHA | USDA |
|---|---|---|
| Interest Rate | 5.114% | 5.209% |
| APR | 5.331% | 5.349% |
| Principal & Interest | $3,738 | $3,887 |
| +Hazard Insurance | $125 | $125 |
| +Property Taxes | $729 | $729 |
| +Monthly MI/Fee | $310 | $205 |
| Total Estimated Monthly Mortgage | $4,902 | $4,946 |
| Down Payment*** | $24,500 | $0 |
Based on the comparison above you would have to spend $24,500 on a down payment with an FHA loan. A USDA loan would allow you to buy a home with $0 down in this scenario and the monthly payment would only be $44 more a month.
***Note: There are typical closing costs that will still apply when you obtain financing for a home such as Lender Fees, Title/Escrow Fees, Prepaids, etc. Inquire with us for a breakdown of potential closing costs. Remember that you may be able to include some or all your closing costs if the value comes in higher than the purchase price.
If you do not meet the income limit and/or the property you are interested in is not in an eligible area, an FHA loan may be the next best thing. Check out our article about FHA Loans or contact us and we will be happy to go over options with you.
Helpful Resources:
Check to see if your household meets the income limit for the county you plan to purchase in: http://eligibility.sc.egov.usda.gov. Make sure you select “Single Family Housing Guaranteed” then click on Income Eligibility and follow the prompts to select County.
Check to see if property is in an eligible area: http://eligibility.sc.egov.usda.gov. Click on “Single Family Housing Guaranteed” then Property Eligibility and enter the full address of the property.
A USDA loan could help you realize your dream of homeownership. Contact us at Community First Mortgage today for any questions or click on this Loan Application Link to apply and get pre-approved.
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