Buying a home is an exciting milestone, but it can also be challenging, especially when finances are tight That’s why USDA home loans are such a great option for many folks in Utah These government-backed loans make homeownership possible even with low income or imperfect credit.
As someone who just bought my first home in Utah with a USDA loan, I want to share my experience to help others learn more about this program. There’s a lot of great info on the USDA Rural Development websites for Utah that I’ll link to as well
What Are USDA Home Loans?
USDA home loans are mortgages insured by the United States Department of Agriculture They help low-to-moderate income households in rural areas get affordable financing to purchase a home,
Some key facts about USDA loans:
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No Down Payment Required: This was huge for me as a first-time buyer. You can get a USDA loan with 0% down!
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Low Interest Rates: USDA loans often have lower rates than conventional mortgages. The current rate is around 4.75%.
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Flexible Credit Requirements: USDA loans are available even if you have limited credit history or a credit score as low as 640.
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Low Monthly Costs: Interest rates, mortgage insurance, and allowable debt ratios make monthly payments affordable.
Basically, USDA home loans open up homeownership to people who might not qualify through regular lenders. If your finances are limited, I highly recommend looking into them.
USDA Loan Requirements in Utah
While USDA loans are more flexible than conventional mortgages, you still need to meet certain eligibility standards. Here are the basic requirements to qualify for a USDA home loan in Utah:
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Location: The home you buy must be located in a “rural” area as defined by USDA guidelines. Most of Utah outside the Wasatch Front qualifies. You can double check specific addresses on the USDA eligibility site.
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Income Limits: Your household income must be below the income limits set for your county and household size. Limits range from $60,000 to $108,000 depending on area.
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Credit Score: Applicants generally need a minimum credit score of 640 to qualify. Lower scores may be accepted with good explanation.
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Debt-to-Income Ratio: Your total household debt compared to income must be below a set cap, typically around 29% – 41% depending on your state.
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Homebuyer Education: You’ll need to complete a homebuyer education course through an approved provider.
As long as you meet these requirements, you’ll be in good shape to get approved! The Utah USDA fact sheet has all the details.
How to Apply for USDA Home Loans in Utah
Here are the steps I followed to get my USDA home loan in Utah:
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Contact a lender – Reach out to lenders in your area that offer USDA financing and compare options. I got quotes from 3 different lenders before selecting the best fit.
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Get pre-qualified – Work with your lender to confirm you meet the income and credit requirements. Getting pre-qualified helps you know the maximum amount you can borrow.
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Complete loan application – You’ll provide documents like pay stubs, tax returns, and bank statements to verify your finances.
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Get homebuyer education – Sign up for a course through a HUD-approved counseling agency. Most courses can be taken online.
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Find a home – Once pre-qualified, start hunting for homes in your price range located in eligible rural areas.
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Make an offer – When you find the perfect home, make an offer contingent on getting the USDA loan approved.
It took about 6 weeks from my initial loan application to closing day! The USDA application guide breaks down the timeline and what’s needed.
USDA Loans for Home Repairs in Utah
In addition to purchase loans, USDA also offers loans and grants to repair, renovate, or modernize existing homes in Utah.
Key facts on USDA home repair assistance:
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Very low-income homeowners can get loans up to $40,000 and grants up to $10,000.
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Loans have a fixed 1% interest rate and 20 year term.
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Grants have no repayment as long as you live in the home for 3+ years after repairs.
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Funds can be used for almost any home repair – roof, foundation, heating, accessibility upgrades, and more.
These programs are an amazing resource for rural homeowners struggling with repairs. I know my grandfather in Utah was able to get a USDA repair grant to fix his roof.
Check the Utah USDA repair fact sheet for full eligibility details and application process.
Why I Recommend USDA Home Loans
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Affordable: Between low rates, no PMI, and flexible credit requirements, USDA loans open doors for lower income borrowers.
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Accessible: The streamlined application process makes getting a USDA loan simple and straightforward.
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Helpful: Local USDA office staff provide guidance to help borrowers qualify and select the best program.
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Reliable: Backed by the federal government, USDA loans are a stable, secure option for homebuyers.
Homeownership was always a dream of mine, but I didn’t think it would happen this soon. Thanks to the USDA loan program, I was able to make it a reality right out of college. I hope others can now achieve their dreams too!
USDA Home Loan Limits In Utah
USDA does not have set loan limits in the same way FHA or VA loans do. The maximum loan amount is determined by the borrower’s ability to qualify when applying the income restriction, and the debt to income ratio restriction.
Utah USDA Rural Loan
USDA stands for United States Department of Agriculture. The Rural Housing Service (RHS) is a department within USDA that offers the Guaranteed Rural Housing Loan Program – most people know it as the USDA Loan.
The USDA loan program is designed to assist low and moderate income families in getting affordable mortgages in eligible rural areas. To access the USDA loan eligibility map, click here.
While I only originate mortgage loans in Utah, these USDA loan program guidelines will apply in all states, with the expected variations in income limits.
There are a number of restrictions associated with USDA Rural loans, but don’t let that deter you from purchasing an eligible property. If you don’t mind living further from the busy city life, USDA loans rank number two in my book – right after the VA military loans. What’s there not to like?
- 100% financing, no down payment required
- closing costs can generally be covered with a slightly higher interest rate, or via seller concessions
- lower interest rates specific to government loans
- no mortgage insurance, just a very low annual fee
- more house for your dollar, due to the rural location requirement (and more time spent NOT IN TRAFFIC!)
Please note that while USDA technically allows construction loans, lenders will not do a construction loan with less than a 20% down payment.
You can try to find a builder that will carry the construction loan for you, and allow you to do the permanent financing as a USDA loan once the home is completed (the process is started about 30 days before the estimated completion).
Odds are, a builder will be unlikely to take the risk of building a custom home for a client with “no skin in the game”, and no ability to cover a low appraisal. Custom construction also takes month, time in which you your circumstances could change, making you ineligible for the loan.
Just like Utah FHA loans have an Up Front Mortgage Insurance fee, and an Annual Mortgage Insurance fee, the Utah USDA loan has a Guarantee Fee, and an Annual Guarantee Fee.
The Guarantee Fee amount is currently at 1%
The Annual Guarantee Fee amount is currently at 0.35%
Example: On a $200,000 loan amount with 100% financing, your upfront/one-time Guarantee Fee would be $2,000; your annual guarantee fee would be $700 – which translates into $58.33/month.
Not all real estate agents know the details on the USDA loan program. If you’re in Utah, but don’t yet have a real estate agent, ask me for a recommendation. I make sure the ones I work with are well educated on this program.
How do I get a USDA Loan in Utah and What is the USDA Loan in Utah
FAQ
What is the income limit for a USDA loan in Utah?
Is it easier to get FHA or USDA?
What are the pros and cons of a USDA loan?
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Pros
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Cons
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No down payment
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Income limits
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Competitive interest rates
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Property restrictions
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Relaxed credit requirements
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Occupancy requirements
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No PMI requirement
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USDA program fees
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What is a USDA loan for home purchase?
USDA loans, also known as rural development loans, are an affordable mortgage option for buying a home in a qualifying rural or suburban area. They’re backed by the U.S. Department of Agriculture, making them more accessible than other loan options. You can get a USDA loan as a 30-year fixed-rate mortgage.
What is a USDA loan program?
Administered by the United States Department of Agriculture, the USDA loan program is formally known as the USDA Rural Development Guaranteed Housing Loan program. USDA purchase loans are sometimes referred to as Section 502 loans. USDA repair loans and grants are sometimes referred to as Section 504 loans or grants.
Where can I get a USDA loan?
The USDA loan program is available throughout the country, not just in states known for their agricultural production. For example, Klamath Falls, Oregon, has museums, a performing arts center, restaurants and shops, along with proximity to Crater Lake and a wildlife refuge. You could buy the single family home at 517 N. 4 th Street for $144,900.
What is an FHA loan & a USDA loan?
The Federal Housing Administration (FHA) offers FHA loans, which include many of the same features provided by USDA loans. An FHA loan is another type of government-backed loan for moderate-income and low-income borrowers. You only need a credit score of 600 to get approved for an FHA loan.