If you’re buying in a rural area and have low income, you may qualify for a USDA home loan. This article provides information regarding the calculation of USDA loan payments. Use this information to determine if this loan would work for you and your family.

How Do I Apply for a USDA Loan?

The application process is similar to that of other mortgage loans, such as VA and FHA. In order to offer USDA loans, lenders must first be approved. Your mortgage lender can walk you through the application process as well as present you with other options to consider.

If you qualify, this may well be the best option for you. Be sure to let your real estate professional know if you are looking for a USDA eligible property —additional restrictions come with this loan type.

Calculating Your USDA Monthly Payment

Here are the major factors to consider when calculating your monthly payment:

Principal and Interest

The principal portion of your loan payment goes toward paying down the actual loan balance. The interest is the extra cost you pay for borrowing money. Interest rates fluctuate daily, so your rate may change before you lock it in on the loan documents.

Taxes and Insurance

USDA loans include the taxes and insurance in your monthly payment. Your local property tax collector can help you estimate what the taxes will be.

Guarantee Fee and Monthly Premium

There are two fees that are unique to USDA loans. One is a one-time fee and the other has to be factored into your monthly payment.

• The USDA Guarantee Fee is 1.00% of the loan amount. It’s factored into the total amount borrowed.
• The USDA monthly premium is a .35% charged, calculated monthly and is part of your monthly payment.

You can also use a USDA home loan calculator to estimate your monthly payment.

Using a USDA Home Loan Calculator

This USDA home loan payment calculator helps you estimate how much you need to put aside for your monthly mortgage cost.

Let’s go over a quick example to help you get started:

1. Enter your state, county and city.
2. Enter the purchase price.
3. Enter the loan amount.
4. Enter property type.
5. Enter occupancy type. (USDA loans must be owner occupied)
6. Enter your credit score and contact information to be contacted with a quote.

The calculator gives you a good idea of the areas USDA loans might be available and help your loan officer let you know if USDA will work for you.

Is There a Prepayment Penalty for USDA Loans?

The USDA program doesn’t charge a prepayment penalty. That means you can pay ahead on your loan or pay off the balance whenever you’re ready. This is one of the many benefits of the program.

Many families choose USDA loans because they are designed to work with low-income families. These loans are ideal for homebuyers looking for a safe, decent place to live at a cost they can afford.

Edward Bertrand