A USDA Mortgage is for homes in Rural Areas as defined by the U.S. Dept. of Agriculture. This program allows a borrower to obtain 100% financing based on the sales price or appraisal, whichever is higher. It also allows for reasonable closing costs and prepaids to be financed onto the loan up to the appraised value. There is a low 1% up front guarantee fee financed onto the loan along with a .35% monthly premium added to the monthly principal, interest, tax and homeowners insurance payment. USDA also allows refinancing to borrowers already financed with a USDA loan.
The USDA Mortgage allows for more flexible underwriting and credit criteria than other loan programs. This loan does have house-hold income limitations as published by the USDA based on house-hold size and the State and County the property is located in.