USDA Loans

The United States Department of Agriculture (USDA) Rural Development creates opportunities for families in rural areas to own safe and sanitary homes through housing assistance programs. Depending on the situation, the USDA may guarantee a home loan offered by a local lender, or they may offer financial assistance directly to a borrower. At Megastar Financial, we offer both guaranteed and direct USDA loans to California residents throughout Oakdale, Modesto, Sonora, and Manteca.

The USDA Single Family Housing Guaranteed Loan Program is a program designed to make homeownership easier for low and moderate income families. USDA guaranteed loans are offered by approved lenders and then insured by the USDA. USDA Single Family Housing Direct Home Loans on the other hand are tailored to low and very-low income households and are offered directly by the USDA as subsidies.

USDA Rural Development Single Family Housing Guaranteed Loan Program

By insuring home loans, the USDA makes it possible for families to purchase homes with zero money down, very low interest rates, and the ability to finance closing costs. To be eligible for the USDA Guaranteed Loan Program, a few requirements will need to be met.

  • Household income must be less than or equal to 115 percent of the median income for the area.
  • The home must be used as the borrower’s primary residence.
  • The home must be in an eligible Rural Development area.
  • Borrowers must have an acceptable credit history and be able to afford mortgage payments, taxes, and mortgage insurance.

USDA guaranteed home loans require that two types of mortgage insurance be paid. The first is an upfront premium of 1% of the purchase price which is typically added to the loan balance. The second is an annual premium which equals .35% of the annual mortgage balance. While this is calculated annually, the annual premium is paid in monthly installments as part of your mortgage payment.

USDA Rural Development Single Family Housing Direct Home Loans

The USDA Direct Loan Program, also referred to as the Section 502 Direct Loan Program, is a loan offered by the USDA directly to low and very-low income families. Direct loans are designed to help families that are without safe and sanitary housing and that cannot obtain alternative financing. The USDA defines low income as being between 50 and 80 percent of the area median income (AMI) whereas very-low income is below 50% of the AMI. As with guaranteed loans, certain requirements will need to be met in order for a borrower to be eligible for the USDA direct loan program.

  • Applicants must be without safe and sanitary housing.
  • Applicants must be unable to obtain a loan from other sources and must meet specific income requirements.
  • The home must be the borrower’s primary residence and be located in an eligible Rural Development area.
  • The home must be 2,000 square feet or less, not have a market value in excess of the applicable area loan limit, and not have an in-ground pool.

USDA Rural Development loans help make it possible for low and moderate income families throughout California to own safe and affordable homes. At Megastar Financial, our goal is to make homeownership a reality for all families throughout Oakdale, Modesto, Sonora, and Manteca. Contact us today for more information on California USDA loans.