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First Time Homebuyers and USDA Loans

Purchasing a first home is an exciting milestone in any person's life. However, those unfamiliar with purchasing a home - especially with a USDA Loan - will find themselves with quite a few questions, starting with, "Should I continue to rent or buy?"

Cost of Waiting

Buying a home is one of life's biggest investments and ensuring you get the best deal can pay big dividends for decades to come. Fortunately, USDA Loan interest rates, which play a big role in how much home you can afford, are still low when compared to years past.

Three decades ago, interest rates hit highs that exceeded 17 percent. Fortunately, over the years, these rates have lowered considerably and made purchasing a home a much easier decision. But according to reports from the National Association of Realtors, interest rates are expected to rise by more than a full point in 2014.

What this means for buyers is that your purchasing power now is potentially much higher than what it could be even six months from now.

For example, at current conditions a potential borrower could buy a $150,000 home with a monthly payment near $950 a month. If rates rose an entire point as expected, that payment would increase nearly $100 a month - which would cost the borrower nearly $36,000 in additional interest over the life of the loan.

How Much Home Can I Afford?

After deciding if now is the right time to buy, many potential homebuyers then ask themselves, "How much can I truly afford?"

This question takes on many factors, including you and your family's income, additional debts, a potential down payment - which isn't required with a USDA Loan - in addition to costs like homeowners insurance, taxes and HOA fees if applicable.

To help our borrowers, USDA Loans.com provides this convenient USDA Mortgage payment calculator to set expectations by calculating monthly mortgage payments.

Advantages of a USDA Loan:

  • No Required Down Payment is among the major advantages of a USDA Loan. As with conventional options, many times a minimum of 10 percent of the home's value is required to be placed as a down payment, minimizing your savings and liquid assets. Fortunately, the USDA Guaranteed Loan is one of the last remaining programs in the country that does not require a down payment.
  • Easier to Qaulify is one of the major reasons many first-time homebuyers flock to this program. Many first-time homebuyers lack a strong credit history, which can make it more difficult to get approval for a mortgage or qualify for an affordable interest rate. Since the Section 502 USDA Rural Development Loan is guaranteed by the Agency, lenders are more willing to offer first-time homebuyers competitive rates and terms.
  • No Maximum Purchase Price is another great reason to choose the USDA Mortgage option. With the USDA guaranteed mortgage, there is no maximum purchase limit, allowing more properties to be eligible, including sub-divisions, gated communities and town homes.

Other Helpful Resources

USDA Home Loan Calculator

This free USDA Loan calculator gives you a snapshot of what your monthly payments could be as a first-time homeowner using the Section 502 USDA Home Loan option

USDA Loan FAQs

Here you will find a list of common questions our Loan Officers receive. Use this great resource meant for first-time USDA homeowners.

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