Everything You Need to Know About USDA Rural Home Loans in Oregon

As a first-time homebuyer in Oregon, I understand the struggles of finding an affordable mortgage. With high home prices in cities like Portland, many are priced out of the market. That’s why I was excited to discover USDA rural home loans as an option.

In this blog post, I’ll share everything I learned about how these loans work and using them to buy a home in Oregon. Whether you’re a first-timer like me or looking to refinance, read on to see if a USDA loan could be right for you!

What Are USDA Rural Home Loans?

USDA rural home loans are a special type of mortgage backed by the United States Department of Agriculture They help low-to-moderate income buyers purchase homes in eligible rural and suburban areas by offering

• 100% financing – no down payment required
• Low fixed interest rates
• Low mortgage insurance costs
• Liberal credit guidelines

The USDA’s goal is to help more people living in small towns and agricultural communities achieve homeownership. By removing barriers like large down payments, they make owning more accessible.

These mortgages are available through approved lenders. When you qualify, the USDA guarantees the loan, protecting the lender from default. This allows them to offer better rates and terms.

USDA Loan Requirements

To qualify for a USDA home loan in Oregon, you must meet certain eligibility standards:

• Income Limits – Your household income must be below the limit for your area. View Oregon income caps here.

• Home Location – The property must be in a USDA-designated rural zone, Check eligibility by address here

• Credit History – You must have a credit score of 640 or higher. The USDA offers manual underwriting for those below 640.

• Debt-to-Income Ratio – Your total DTI must be below 41% with a USDA loan.

• Home Types – Single family homes, townhomes, some condos qualify. No co-ops or multi-family units.

• First-Time Homebuyer – The USDA program assists first-timers, but you can have owned a home previously.

• Occupancy – To use a USDA loan in Oregon, you must make the home your principal residence.

• Citizenship – Applicants must be U.S. citizens, U.S. non-citizen nationals, or qualified aliens.

As long as you meet these requirements, you can apply for USDA financing on your Oregon home purchase!

How Do USDA Loans Work?

USDA home loans work similarly to other mortgages with a few unique features:

No Down Payment

A major benefit is that USDA loans require zero down payment. This helps buyers who can’t save up a large lump sum enter homeownership more easily.

Closing Costs

You can finance your closing costs and fees into the mortgage. No need to pay these upfront.

Fixed Rate

USDA loans offer fixed rates for the full 30-year term. This provides stability as your rate never increases.

Upfront Guarantee Fee

There is a 1% upfront guarantee fee added to your loan amount. This covers the USDA’s backing of your mortgage.

Monthly Mortgage Insurance

You’ll pay an annual mortgage insurance premium of 0.35% of the loan amount monthly. This also goes to the USDA to insure them against you defaulting.

Loan Limits

There are no explicit loan limits, but the USDA does cap the amount you can borrow based on your finances and the appraised home value.

Refinancing Options

Once you have a USDA loan, you may be eligible to refinance into another 30-year USDA mortgage if rates drop to save money.

How To Apply for USDA Home Loans in Oregon

If you want to buy a home with USDA financing, follow these steps:

1. Check Your Eligibility – Use the USDA tools linked above to confirm you meet the requirements.

2. Find a Lender – Connect with a USDA-approved lender to start the mortgage pre-approval process.

3. Get Pre-Approved – Work with your lender to submit documents and get pre-approved for a loan amount.

4. Make an Offer – With your pre-approval letter, you can confidently make an offer on a home in your price range.

5. Allow Home Inspection – If your offer is accepted, permit the USDA to appraise the property and ensure it meets standards.

6. Close on Your Home – Finally, set a closing date with your lender to sign paperwork and get the keys!

While every home purchase is different, this provides the basic steps to follow. Your lender will help you navigate the specifics.

The process takes about 30-60 days with a USDA loan, which is similar to conventional mortgages. It’s easier than you think to buy a home with 100% financing!

USDA Loan Rates in Oregon

USDA mortgage rates in Oregon tend to be lower than even conventional loans. Here are current estimates:

• USDA 30-Year Fixed Rate: 3.5% – 4%

• Conventional 30-Year Fixed Rate: 4 – 4.5%

• FHA 30-Year Fixed Rate: 3.75 – 4.25%

Always compare your options from different lenders. USDA loans often have the lowest interest rates, but shop around for the best deal.

You can expect closing costs between 2-5% of the total loan amount. Pay attention to lender origination fees, which the USDA caps at 1.5% of the loan.

USDA Eligible Areas in Oregon

In Oregon, USDA loans are available in rural towns and counties not near major metro areas. Below are some of the eligible cities and counties:

• Eugene, Medford, Bend
• Salem, Roseburg, Redmond
• Klamath Falls, Coos Bay
• Umatilla County, Union County
• Morrow County, Wasco County

See the full eligibility map for Oregon here. You can also enter an address to check if a specific home qualifies.

Around 97% of Oregon land is open to USDA financing. Only urban Honolulu County is fully ineligible. So chances are high the home you want will be in a qualified area!

Pros and Cons of USDA Loans

Before applying, weigh the unique pros and cons of USDA home loans:

Pros

• No down payment required
• Lower interest rates
• Low upfront mortgage insurance
• More flexible credit requirements
• Refinancing options available

Cons

• Upfront guarantee fee of 1%
• Monthly mortgage insurance premium
• Must meet income and location requirements
• Home has to pass USDA inspection
• Potential for higher total interest costs over loan term

For buyers who struggle to save for a down payment or have limited finances, the pros often outweigh the cons. But carefully consider your personal situation.

Alternatives to USDA Loans

Some other first-time homebuyer programs available in Oregon include:

• FHA loans – 3.5% down payment required
• VA loans – No down payment for veterans
• Down payment assistance programs – First-timer grants for down payment/closing costs
• Conventional 97 – 3% down payment on conventional loan
• Oregon Bond Loan program – Tax-exempt mortgage for first-timers

Shop multiple options to find the right mortgage loan for your financial situation and goals. USDA lending stands out for its zero down payment and low rates.

The Bottom Line

Consider your eligibility and compare USDA loans to other mortgages. If buying in a rural Oregon town or suburb, be sure to look into this option. The low rates and zero down payment feature might make your dream of owning finally come true!