Frequently Asked Question: Are USDA Loans Good?
Q: Has anyone used a USDA Loan? Are USDA loans good? How do they work, and where can one use it on Cape Cod?
A: Yes, the USDA guaranteed home loan is a great mortgage program. USDA rural housing loan programs allow qualified homebuyers to get loans with minimal closing costs and no downpayment.
The purpose of the USDA loan program is to enable eligible low- and moderate-income borrowers (who earn up to 115 percent of the Area Median Family Income) to purchase modestly priced housing for their own use as a primary residence. The program is available for both the purchase and repair of existing as well as newly constructed dwellings.
Much like VA loans, USDA loans have a "funding fee" which is 2% of the loan amount. The funding fee can be rolled into the mortgage. As a comparison, FHA loans have a upfront mortgage insurance premium of 1.75% of the loan amount. However, while FHA loans also have a monthly insurance premium, USDA loans do not. With USDA, you could buy a home with no money down, and have lower monthly mortgage payments than with a FHA loan with a 3.5% down payment. See this sample loan comparison flyer to see the difference between a conventional mortgage, an FHA mortgage, and a USDA loan.
All homes on Cape Cod (Barnstable County) and the Islands (Martha's Vineyard and Nantucket) are eligible for the USDA loan program.
In Massachusetts, most homes in Plymouth, Bristol, Worcester, Franklin, Hampden, Hampshire, and Berskhire counties qualify for the USDA loan program. The southwest portion of Norfolk county, the northwest portion of Middlesex county, and the northeast portion of Essex county qualify as well. Homes in Suffolk County, in cities, and in large metropolitan areas do not qualify for the USDA home loan program.