Scott Storace - Branch Manager, 100 Pacifica Drive Ste. 140, Irvine CA 92618 NMLS #226339 949.973.0141

"From the minute you call me to the minute we close, I have your back. No hassles, no banker’s hours & quick response times." - Scott Storace

  • Home Loans up to $3,000,000
  • Interest Rate Float Down Option

Have Questions? Call 949.973.0141

USDA Home Loans: No Initial Investment!!

USDA - Not Just For Farms or Food!!

USDA – Not Just For Farms or Food!!

Orange County, CA – There will be plenty of people out there who have never even heard of the USDA program. Don’t fret. Unless it’s something that has directly affected you in the past, there’s no real reason why you might have heard of it. It is somewhat of an unusual product which is only available in rural areas. Orange County is far from rural. But there are places nearby where the USDA loan is an option.

The full name of the program is the USDA Rural Development Guaranteed Housing Loan Program. These loans are insured by the U.S. Department of Agriculture and are often known as Section 502 Loans. They offer a search tool that allows us to enter a prospective address to determine if the property is in a USDA eligible area. So, if you think you’re in an area that may be USDA eligible, contact us to find out and eliminate all doubts.


One of the biggest benefits of using the USDA loan program is that they offer 100% financing. That’s right, much like a VA home loan, there is no down payment required. Also, like most mortgages, the USDA loan program doesn’t have any prepayment penalties in place either. But they do make sure they you stay within their tight debt-to-income ratio guidelines. The full PITI home payment should not be greater than 29% of your gross income. And your total debt, including the home and other financed liabilities, should not exceed 41%. Exceptions can be made with strong compensating factors.

If you’re looking at USDA options, it’s important to be aware that you can only opt for a 30 year fixed rate. 15 year options are not available. If you have any problems with closing costs though, you will be pleased to know that the USDA does allow gifts. These can come from family members and non family members. You just have to ensure that you use a gift letter alongside your application which you will be able to secure from your loan officer.


As of fall 2012, the USDA became self funded. Prior to this point it had always been tax payer subsidized. This means of course that the loan program is now no longer reliant on the general public to stay in business. Naturally this means that things had to change slightly, and the changes that were put in place were as follows:

  • Purchases- a 2.00% upfront funding fee to be paid at closing, based on the loan size.
  • Refinances- 2.00% fee again to be paid upfront at closing, based on the loan size.
  • For Loans, the introduction of a 0.40% annual fee which is based on the remaining balance.

For example, if you’re seeking a $300,000 loan, you would be responsible for  a $6,000.00 premium at closing and a $100.00 annual fee that would be paid monthly. But since the annual fee is based on the remaining balance, and the balance declines monthly, so does the fee. In addition the 2.00% funding fee can be financed into the loan. With a motivated seller and a strong appraisal, it’s possible to structure a purchase where you pay nothing out of pocket.

If you think that you might be in the right part of the world to be able to apply for the USDA program, then speak to a mortgage advisor today. The flexibility of these programs is excellent, and you really should take advantage if you can.

Scott Storace

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