USDA Loans

Your Home Matters at Mabrey

USDA Loans At Mabrey

A USDA Loan is a government-backed loan that offers a competitively priced option for low-income borrowers who are looking to purchase a home in an eligible rural area, as designated by the government (check here to see eligible areas). The U.S. Department of Agriculture (USDA) guarantees the loan, similar to a VA or FHA loan where the USDA will insure a mortgage offered by the lender. These loans come with a small down payment and low interest rate, if the borrower meets all of the location, income and financial qualifications set by the USDA and the lender.

Is a USDA loan right for me?

If you have a low or moderate income and are wanting to purchase a home in a rural area, a USDA loan could be the best mortgage option for you. You’ll receive a lower interest rate and be able to make a small down payment on the mortgage, which could be beneficial given your income restrictions. A small USDA guarantee fee will be less than mortgage insurance, which would be required on a Conventional Loan where less than 20% is put down at closing.


Down Payment

One of the features of a USDA Loan is a small down payment option for those who qualify. Only a 3.5% down payment is required to secure a USDA Loan.

Mortgage Insurance & USDA Guarantee Fee

Mortgage insurance is not necessary with a USDA Loan, one of the perks of the loan itself, but borrower’s will be required to pay a small guarantee fee throughout the course of the mortgage to help keep the program funded. This is comprised of an upfront fee of 1.5% at closing and an annual fee of 0.35% of the loan balance, amortized across the life of the loan.

Credit Score

Mabrey Bank requires a credit score of at least 640 to qualify for a USDA loan.

Debt-to-Income Ratio

The debt-to-income (DTI) ratio of the borrower must not exceed 56% for those with high credit scores, or 45% for those with lower credit scores.

Loan Size

The maximum loan limit for a USDA Loan at Mabrey is $472,030.


A USDA Loan applicant must be a U.S. citizen, noncitizen national, or a permanent resident alien living in an “eligible rural location” as designated by the USDA. The USDA provides an interactive eligibility map to determine if your location qualifies for this loan. Click here to explore.


USDA loans are meant for low-income individuals and families. An applicant’s adjusted gross income cannot exceed 115% of the median income of the area where the home is being purchased. And they must be able to show a history of stable, steady income while having the ability to make 12 months of mortgage payments based on assets, savings and earnings.


An appraisal by a certified appraiser will be required to ensure the home value is appropriate for the loan amount, and that the home is in a livable condition to qualify for a USDA Loan. This is not the same as a home inspection.

Benefits of a USDA Loan

  • No down payment required
  • No mortgage insurance required
  • Mortgage interest rates as low as 1%
  • Flexible home types qualify (single-family, condo, townhome)
  • Flexible credit guidelines


How strict are USDA Loan Appraisals?

A USDA Loan will require a home appraisal, but that is different from a home inspection. An appraisal will ensure that the home is being sold for the appropriate value given the specs of the home. It will also determine that the home meets the USDA standards of basic living, such as the home has a roof, has heating systems, no broken windows and no copious insect damage. A home inspection will go over the home much more in-depth, uncovering every flaw. And while a home inspection is not a requirement towards a USDA Loan, it is often a good idea for any home buyer before purchasing a house.

Can you buy land with a USDA Loan?

Yes, but the USDA Loan must also include the construction of a home on that land. This is also known as a USDA Construction Loan, where a borrower can finance the land, home construction and mortgage all into one loan. These loans can be hard to find and can also come with lengthy closing times. These loans must also meet the basic requirements of the USDA including debt ratio, income limits and location restrictions.

Is a USDA Loan a Conventional Loan?

No. A USDA Loan is government-backed and lowers the down payment, interest rate and mortgage insurance for qualified borrowers. A Conventional Loan is not backed by a U.S. government entity and must conform to specific regulatory guidelines.

What is the minimum and maximum income for a USDA Loan?

While there is no set minimum income for a USDA Loan, a borrower will need steady, stable income to qualify for the loan and make the necessary mortgage payments through the life of the loan. The maximum income for a USDA guaranteed loan is 115% of the median income in the area you are purchasing the home.

Does a USDA Loan cover closing costs?

It depends. Closing costs can be financed into a USDA Loan if the home appraises for more than the purchase price. However, there are other ways to get closing costs covered, including the seller of the home contributing to closing costs (up to 6% of the purchase price) or a lender could contribute themselves in exchange for a higher interest rate.

Do USDA Loans require escrow?

Yes. An escrow account covers a borrower’s property taxes as well as home insurance. No matter your down payment, all USDA mortgages require an escrow.

Can you have a cosigner for a USDA Loan?

Yes. This is one of the top perks of a USDA loan as the co-signer does not need to be an occupant of the home. However, the co-signer will be required to meet the same income restrictions and requirements as the borrower for the purchase location.

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