Changes to USDA Mortgages

2014-09-03_usdaUSDA offers mortgages with no down payment for homes that are located in designated rural areas to borrowers who meet household income limits. The mortgage rates are very competitive and the mortgage insurance (technically called “guarantee fees”) are very affordable. It’s truly a great program for those who qualify and are buying a home in rural areas, like Duvall, Enumclaw or Anacortes.

Recently, USDA issued Handbook 3555 with updated regulations for USDA mortgages. Here are just a few of the changes:

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USDA back up and running

usdaUSDA, which offers zero down loans for homes located in designated rural areas, was effectively shuttered during the government shutdown. Once the shutdown was over, USDA had a delay in getting their cogs moving at full speed. We’ve received word that USDA is back to “normal”.

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NAR fighting to keep current boundaries for USDA Zero Down Loans

There’s just 10 days remaining before the boundaries determining eligible properties for USDA financing are set to change unless Congress takes action. I shared with you USDA had posted the “future” boundaries on their website back in April. 

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Reader Question: Can Closing Cost be financed with a VA Loan?

I received this email from one of our subscribers:

 ”…with a VA mortgage,  can you finance buyer closing costs in excess of the purchase price (e.g. not ask for seller financing contributions, but just borrow them in excess of the purchase price)”

With a VA mortgage, the buyers closing cost cannot be financed, with exception to the VA funding fee, regardless of the appraised value.

The VA loan amount is limited to the purchase price, appraised value or VA county loan limit (or VA jumbo loan amount)*, whichever is less.

*NOTE: VA does not set actual loan limits on counties. They do set a limit as to their maximum guarantee (meaning zero down financing). In the greater Seattle/King-County area, the loan limit for zero down financing is currently $500,000. Click here for a complete list of VA loan amounts per county.  VA loan amounts exceeding $500,000 in the Seattle/King County area are considered VA Jumbos and will require some down payment depending on the difference between the sales price and county loan limit. 

USDA loans, on the other hand, will allow for buyers closing cost to be financed IF the appraised value is higher than the sales price. The loan amount is limited to the appraised value and must be applied to bona fide closing cost.

USDA loans are also zero down programs and are only eligible in specific designated rural areas, like Snoqualmie, Carnation or Duvall, and to borrowers who meet certain household income limits. 

Sellers can contribute towards closing cost for both of these mortgage programs and currently, low mortgage rates are often paired with enough rebate pricing to cover a majority of the closing cost.

Thanks for your question!

USDA Rural reveals proposed new boundaries for Zero Down Mortgages

USDA Rural loans offers zero down financing to homes located in specific rural areas and to qualified borrowers who’s households who meet income limits.

Many Washington state home buyers have been anxiously waiting to see if they will impacted with the pending changes to USDA boundaries making zero down financing an option.

Recently USDA Rural Development updated their website with maps showing “future eligible areas” which will be based on census data from 2010. The proposed boundaries are set to go into effect as of October 1, 2013 baring Congressional Action. 

In order to have access to the maps, you’ll need to agree to USDA’s disclaimer.  Simply click the link for “future single family” and enter the property address to see if it is in an a proposed eligible area for USDA financing.

Meanwhile it’s “business as usual” with USDA home loans.

If you are interested in a USDA zero down home loan, or any mortgage for homes located in Washington state, I’m happy to help you! 

Update on USDA Zero Down Rural Home Loan Program

USDA mortgages offers home buyers the opportunity to buy a home in a designated rural area with zero down payment. Area’s outside of the peach colored area in this map may be eligible for USDA zero down financing.

This program is available to borrowers who meet certain income limitations. Currently in the King County area, a household with 1 to 4 family members may qualify if their household income is $93,450 or less and $123,350 or less for households with 5 to 8 family members.

Home buyers in USDA desginated rural areas like Maltby, Vashon Island and Snoqualmie, who are depending on zero down financing have been caught in limbo with the future of the program in question. It looks like this uncertainty may almost be over.

Last week, the Senate and House approved FY 2013 Continuing Resolution which, among other things, would allow USDA loans to continue through September 2013 to current designated rural areas.

The bill awaits President Obama’s signature.

Meanwhile, we have been told by our USDA lenders that it is “business as usual” and we continue to offer this program to qualified home buyers and home owners wanting to refinance their existing USDA mortgages.

If you are interested in a mortgage rate quote for a USDA zero down loan or other mortgage programs for homes located in Washington, click here, I’m happy to help you!

Potential changes to USDA Zero Down Mortgages

USDA mortgages are available with zero down payment to borrowers under certain income limits who want to buy in a designated rural area. USDA provides maps that illustrate whether or not a geographical area is allowed to have this program. 

The maps for USDA were set to be revised late last month with revisions taking place at the end of this month have been postponed by Congress. USDA mortgages are proceeding “business as usual” until they hear otherwise from “the hill”.


The orange areas of this map shows areas that are currently not eligible for USDA zero down payment financing.

Congress has introduced bills that would change how a rural area is defined, including increasing the population to 35,000 based on the 2010 Census which would allow more homes to be eligible for zero down USDA mortgages.

USDA loans offer very competitive rates. Just yesterday on Twitter, I shared a quote based on a USDA loan in the Maltby area in the mid 3’s for a 30 year fixed with zero down payment for a $500,000 sales price based on a family of 5. 


If you would like a mortgage rate quote for a zero down USDA mortgage on a home located in Washington, click here.

In addition to the property being in a designated rural area, to qualify for the USDA zero down mortgage program, your household income cannot exceed the current income limits. Current household income limits for properties in King and Snohomish counties are $93,450 for a family up to 4 and $123,350 for a family of 5 to 8 members living in the home.

If you’re interested in a USDA zero down mortgage in Duvall, North Bend, Port Townsend or anywhere in Washington state, I’m happy to help you.

Updated Income Limits for USDA Zero Down Home Loans

USDA recently published updated income limits for their zero down mortgage program which is available in rural areas. Other mortgage programs, like FHA or conventional, has loan limits which limits availability. USDA does not have loan limits, the program is restricted by household income. 

USDA offers a government backed program that allows zero down payment on homes that are in a designated rural community for families earning less than a certain income. A majority of Washington State single family residences (homes and condos) qualify…of course if you live in metropolitan areas like Seattle or Bellevue, odds are your home will not. However, if you’re considering areas like Duvall, parts of Maple Valley, Vashon or Bainbridge Island, it may qualify for zero down financing.

To qualify, families must be without “adequate housing” (may not own a home or adequate home), must have reasonable credit history and be able to afford the mortgage (29/41 is the debt to income ratio guidelines).  

Income limits vary by county and the entire household income is considered (not just the primary borrowers or those borrowers on the mortgage) for determining if the income meets the guidelines.  This is separate from income considered for “debt-to-income” ratios.  USDA loans allow incomes up to 115% of the median income for the area.  Income limits vary on household size from 1-4 person or 5-8 person. 

As of the publishing of this article, in Washington, the income limits by county are:

  • King and Snohomish Counties: 1-4 Person $93,450 | 5-8 Person $123,350
  • Pierce County: 1-4 Person $82,450 | 5-8 Person $108,850
  • Island County: 1-4 Person $89,550 | 5-8 Person $118,200
  • Kitsap County:  1-4 Person $86,950 | 5-8 Person $114,750
  • Thurston County: 1-4 Person $88,900 | 5-8 Person $117,350
  • Clark and Skamania Counties: 1-4 Person $83,950 | 5-8 Person $110,800
  • San Juan County: 1-4 Person $78,050 | 5-8 Person $103,050
  • Whatcom County: 1-4 Person $80,300 | 5-8 Person $106,000
  • Benton and Franklin Counties: 1-4 Person $78,000 | 5-8 Person $102,950
  • Skagit County: 1-4 Person $78,000 | 5-8 Person $102,950
  • Asotin County: 1-4 Person $74,750 | 5-8 Person $98,650
  • All other Washington counties:  1-4 Person $74,900| 5-8 Person $98,850

You can check current USDA income limits by visiting the USDA site (clicking here)…be sure to click the “guaranteed” option.   Income limits can and do change. You can also use USDA’s income eligibility calculator which will factor in deductions to income, select the “guaranteed” results (not “direct”).

Income used to determine if a family is under the household income limits includes all those (18 years and older) who will be living in the home regardless of whether or not they’re on the mortgage.  Incomes of children over 18 who working AND who are full time students are not factored. Here is more information of how USDA loans calculate household income.

Once you’ve determined that you meet the household income limits, the next step is to see to see what communities in your area are eligible for USDA financing. You don’t have to go too far from Seattle or Bellevue to find homes that do qualify for this type of mortgage.   Using the USDA site, under “Property Eligibility” click “Single Family Dwelling”.  From there you can either enter a specific address or click on the map to narrow down your search. 

Sellers and real estate agents who are working in neighborhoods that qualify should be sure to include this program as an option they’ll consider for financing on their offers.  

This map is as of the publishing of this post. Areas that are outside of the peachy orange shade are eligible for USDA zero down home loans.


I’m pleased to offer USDA financing as an option for borrowers who meet the criteria. If you have any questions regarding USDA or other mortgage programs for financing homes located anywhere in Washington State, please contact me, I’m happy to help!  Click here for a mortgage rate quote for homes located anywhere in Washington.