The U.S. Department of Agriculture (USDA) offers various loan programs to support farmers, ranchers, and rural homebuyers. USDA loan rates are adjusted periodically based on market conditions. For March 2023, the USDA has announced updated interest rates for key lending programs like farm operating loans and farm ownership loans.
In this article, we’ll break down the new USDA loan rates for March 2023. We’ll look at:
- Current rates for different USDA loan types
- How the rates are determined
- Comparing to conventional mortgage rates
- Tips for getting the best rate on a USDA loan
Whether you’re looking to finance farmland or buy a home in a rural area it’s important to understand how USDA interest rates are set and what it means for you. Let’s dive in!
USDA Loan Rates for March 2023
The USDA has established the following interest rates for loans made in March 2023:
Farm Operating Loans:
- Direct loan rate – 4.750%
- Guaranteed loan rate – 6.500%
Farm Ownership Loans:
- Direct loan rate – 4.875%
- Guaranteed loan rate – 6.500%
Single Family Housing Guaranteed Loans (Rural Home Loans)
- 30-year fixed rate – 6.125%
- 15-year fixed rate – 5.875%
- 5/1 adjustable rate – 5.375%
These rates are effective for loans approved in March 2023. Rates are typically updated on the 1st of each month.
How USDA Loan Rates Are Determined
USDA loan rates are adjusted monthly based on economic factors like Treasury yields, bond market performance, and national average mortgage rates.
However, they do not necessarily move up and down at the same pace or magnitude as conventional home loan rates. USDA endeavors to keep rates affordable for its core constituency of farmers and rural residents.
For direct farm loans (where the USDA is the lender), rates are set based on the cost of government borrowing. Guaranteed loan rates also factor in a 1.5% premium to cover costs.
Comparing USDA Rates to Conventional Loans
USDA home loan rates tend to run 0.25% to 0.5% higher than conventional mortgage rates. For example, in March 2023:
- The average 30-year fixed conventional rate is around 5.75%.
- The USDA 30-year fixed rate is 6.125%.
The spread is because the USDA guarantee allows lenders to offer financing to borrowers who might not qualify for conventional loans.
However, USDA loans require no downpayment and have lower mortgage insurance costs. This can make the monthly payment similar or even lower than a conventional 97% LTV loan.
Tips for Getting the Best USDA Rate
As a borrower, you have a few options to help secure the lowest rate on a USDA-backed loan:
- Shop with multiple lenders to compare rates and fees
- Improve your credit score and debt-to-income ratio
- Consider putting 10% down to get a competitive guaranteed rate
- Buy discount points to buy down the interest rate
- Lock in when rates dip, before they rise again
- Refinance an existing USDA loan when rates fall
Making extra mortgage payments or paying down balances before applying can also help strengthen your case for affordable financing.
The Bottom Line
USDA lending programs provide country residents with access to credit to sustain farming operations and achieve homeownership. Monthly rate adjustments allow these government-backed loans to stay in line with broader market trends while maintaining accessibility.
Check the latest USDA rates and get pre-qualified if you’re considering applying for financing in the near future. With proper preparation and shopping around, you can obtain a competitive interest rate on your rural property or ag loan.
Shopping around isn’t only for the holidays
Since interest rates can vary drastically from day to day and from lender to lender, failing to shop around likely leads to money lost.
Lenders charge different rates for different levels of credit scores. And while there are ways to negotiate a lower mortgage rate, the easiest is to get multiple quotes from multiple lenders and leverage them against each other.
“For potential home buyers, it’s important to get quotes from multiple lenders for a mortgage, as rates can vary dramatically, especially during such a volatile period,” said Odeta Kushi.
As the mortgage market slows due to lessened demand, lenders will be more eager for business. While missing out on the rock-bottom rates of 2020 and 2021 may sting, there’s always a way to use the market to your advantage.
Mortgage rate strategies for June 2024
Mortgage rates continue to display their famous volatility in 2024. Anticipated Fed cuts provide hope for optimism, but ongoing inflation battles keep driving growth.
The central bank held off on a rate hike in its past five meetings, preferring to see if the economy would keep cooling organically. At the most recent meeting in May, the FOMC projected cuts starting as early as June. As always, the committee said it would adjust its policies as necessary — which could mean additional hikes or possibly none at all.
Here are just a few strategies to keep in mind if you’re mortgage shopping in the coming months.
2023 USDA Loan Requirements – Complete Guide For First Time Home Buyers
FAQ
What is the interest rate for a USDA mortgage in 2023?
What is the interest rate for USDA loan in March 2024?
What are the interest rates for loans in 2023?
What was the 30-year mortgage rate in May 2023?
When do USDA loan interest rates start in 2023?
WASHINGTON, March 1, 2023 – The U.S. Department of Agriculture (USDA) announced loan interest rates for March 2023, which are effective March 1, 2023.
What is the maximum interest rate on a USDA loan?
Effective June 1, 2023, the maximum interest rate is 4%, although it can be as low as 1% with payment assistance. Aspiring homeowners must apply directly through USDA Rural Development instead of a private lender. Is a USDA Loan a Good Idea?
What is a USDA loan?
USDA loans are mortgages backed by the U.S. Department of Agriculture to encourage homeownership in designated rural areas. Interest rates on these loans tend to be lower than those offered on conventional loans, which helps make them more affordable. How Does a USDA Loan Work?
What is a USDA farm Service Agency (FSA) loan?
USDA’s Farm Service Agency (FSA) loans provide important access to capital to help agricultural producers start or expand their farming operation, purchase equipment and storage structures or meet cash flow needs. Operating, Ownership and Emergency Loans