Mortgage payment calculator usda loan -
USDA Loan Calculator
This USDA mortgage and closing cost calculator will estimate the loan amount for eligible home buyers, including the USDA funding fee, and the monthly loan payment; including real estate taxes, home insurance, and monthly mortgage insurance (also called PMI). Simply enter the sales price, choose the down payment, and interest rate on the USDA loan and click calculate. Click outside the box after entering a value or using one of the drop down boxes.
►USDA Frequently Asked Questions
Frequently Asked Questions About USDA Loans
Q. What are USDA home loans?
A. The USDA home loan program is a zero down payment mortgage that is backed by the United States Department of Agriculture.
The USDA loan was created to help low to moderate-income home buyers purchase homes in designated rural areas across the United States. The USDA home loans do not require a down payment, and the home seller is permitted to pay a large percentage of the buyer's closing costs. The subject home must be located in a approved area. USDA loan applicants must meet the typical income, credit, employment, and cash savings requirements.
Q. What are the benefits of a USDA loan?
A. The benefits of a USDA home loan include:
- no down payment requirement;
- allowable seller paid closing costs up to 6% of the sales price;
- reasonable interest rates and;
- affordable mortgage insurance
Q. Are USDA loans good?
A. USDA loans are very good because the overall costs are less than most other mortgages.
Q. How much can I borrow?
A. Believe it or not, the USDA loan program does not have a lending limit, however, the applicant must meet the debt to income limits, which in turn limits the amount of money that can be borrowed.
USDA Loan Calculator
What is a USDA Loan?
USDA home loan is a program backed by the USDA Rural Development Guaranteed Housing Loan Program, by the United States Department of Agriculture for eligible home buyers with low to the average income in rural and suburban areas. The purpose of the USDA mortgage is to promote economic growth in rural areas across the United States. The USDA mortgages are issued by private lenders and offer many benefits over the traditional mortgage for qualified buyers.
- USDA loans offer zero down payment
- Reduced mortgage rates.
- Low monthly mortgage insurance
- Lower credit requirement
Please note the USDA mortgage is designed to help low income families, so if your income is high, then you are not qualified for a USDA loan. Specifically, the following are the main restrictions of the USDA loan.
- Must be in a rural and suburban area
- Single family house and for primary residence only
- Low income family - income is calculated by family size and the adjusted annual income must be lower than 115% of the area median income.
There may be other requirements set by the lender such as minimum credit score. Homebuyers should consult the private lenders to learn more about the program and the USDA loan.
USDA Loans Vs. Traditional Mortgages
In a traditional mortgage, lenders prefer the borrower to put down at least 20% on the down payment. If not, the borrower is required to pay private mortgage insurance or PMI to protect the lender in case the borrower defaults on the mortgage. The PMI payment is removed once the borrower has more than 20% of equity in the house, or when their loan to value (LTV) ratio falls below 80%. USDA loan does not require a minimum down payment, but there are two fees the borrower must pay. One is an upfront funding fee, and an annual fee which is similar to the PMI. The upfront fee is a fee that can be included in the loan.
The USDA mortgage calculator is easy to use with breakdowns of every payment showing in the mortgage amortization schedule with monthly and biweekly payment options. The USDA PMI calculator also offers extra payment options that show you how much faster you can pay off the mortgage if you are making regular extra payments. The extra payment can be a one time payment, yearly, quarterly, or every payment (monthly or biweekly). This USDA payment calculator offers a downloadable and printable loan amortization schedule. This USDA home loan calculator with taxes and insurance gives you the option to add taxes and insurance for both the monthly payment and biweekly payment. You will also get a comparison table to compare the biweekly and monthly options and see how much you can save. The Mortgage calculator for USDA loans has an option to include the guarantee fee. For a conventional loan, there is an insurance called the private mortgage insurance or PMI when your down payment is less than 20%. For USDA mortgages, there is something similar to PMI called the USDA guarantee fee and USDA mortgage insurance. The one time USDA guarantee fee is currently 1% of your base mortgage amount, and your final mortgage amount is equal to the base mortgage amount plus the guarantee fee. The USDA mortgage insurance is 0.35% of the loan amount. The USDA payment calculator has the option to change the funding fees and insurance to reflect your mortgage. This is a USDA home loan calculator, check out our advanced mortgage calculator if you need to calculate mortgage payments for conventional loans.
USDA Mortgage Calculator with Taxes and Insurance
Following are the definitions and terms for the USDA loan calculator.
Home Value - the value of your property Down Payment - how much are you planning to put down as a down payment on the property Base Mortgage Amount - how much mortgage are you applying for. This is the difference between the home value and the down payment. Loan Terms - how many years are you planning to pay off your USDA loan. Interest Rate - how much interest will you be paying for the loan? This is a percent of the mortgage amount that you apply for. USDA Guarantee Fee - this is the upfront cost for the USDA loan, which is a fee that you can roll over to the mortgage. Annual Mortgage Insurance - this is the second fee for a USDA loan, and is an annual fee. Final Mortgage Amount - your base mortgage plus the USDA guarantee fee equals the final mortgage amount. Property Tax (Yearly) - how much property tax will you be paying for the house. Home Insurance (Yearly) - how much insurance do you need to pay for the property. HOA Fees (Monthly) - some houses are required to pay monthly HOA fees or the homeowner's associations fee. Payment Frequency - you have the option to choose the default monthly payment or bi-weekly payment to speed up your mortgage payments and pay off your loan faster. First Payment Date - the date that you first start paying your mortgage. Amortization Schedule - show the amortization by yearly or monthly. In the case of bi-weekly payment, you will see the amortization schedule bi-weekly and yearly. Extra Payment - If you are planning to make an extra payment for your USDA mortgage, you can choose an one time extra payment, or a recurring monthly, biweekly, quarterly or yearly payment.
USDA Mortgage Calculator
Use this free calculator to figure your monthly USDA home loan payments inclusive of mortgage insurance premium (MIP), loan guarantee fees, and other common homeowner related expenses including property taxes and insurance. Once you are done with your calculation at the bottom of the calculator there is a button to create a printable amortization schedule.
This calculator figures monthly home payments for USDA loans. To help you see current market conditions and find a local lender current local mortgage rates are published in a table below the calculator.
Current Local Mortgage Rates
Here is a table listing current local mortgage rates.
The following table shows current 30-year mortgage rates available in Los Angeles. You can use the menus to select other loan durations, alter the loan amount, or change your location.
USDA Home Loan Basics
USDA guaranteed loans help fund rural development across the country.
In addition to the following brief overview, we also publish a more in-depth guide to USDA loans which highlights their range of loan and grant programs. The following briefly covers the section 502 loan guarantee program.
Homebuyers May Qualify for a Low-rate USDA Home Loan
Visit USDALoans.com today to prequalify.
The Basics of USDA Guaranteed Home Loans
USDA guaranteed loans help fund rural development across the country. And as home prices continue to increase in major cities, families make the choice to live in the suburbs or rural areas.
In addition to the following overview, we also published a more in-depth guide to USDA loans which highlights their range of loan and grant programs. The following article covers section 502 of the USDA Guaranteed Loan Program.
How USDA Guaranteed Loans Work
A USDA guaranteed loan is a type of mortgage backed by the U.S. Department of Agriculture. This program is specifically designed for low to moderate income homebuyers who are looking to live in rural or suburban locations. It was created to boost rural development by extending credit to qualified homebuyers. Borrowers can purchase, rebuild, improve, or relocate a dwelling in any approved USDA rural area. The USDA guaranteed loan is also referred to as the Section 502 loan, which is based on section 502(h) of the 1949 Housing Act.
USDA loans are an affordable mortgage option that it come with low interest rates compared to common conventional loans. The guarantee secures USDA-sponsored lenders, allowing them to offer much lower rates. It also provides 100% financing, which means eligible borrowers are not required to make a down payment. And unlike conventional mortgages, has more lenient credit score standards. On the other hand, it requires mortgage insurance premium (MIP) which is called a guarantee fee. USDA loan come with reduced mortgage insurance, which is lower than other types government-back loans. MIP is an additional cost that protects lenders in case you default on your mortgage.
USDA guaranteed loans are available as 30-year fixed-rate loans and cannot be taken as an adjustable-rate mortgage. It is only granted for single family homes and cannot be taken for vacation homes or rental properties. Your property may have a barn or silo, but it should not be used for commercial purposes. A condominium unit can be approved for a USDA loan, as long as its located in a USDA rural area.
Moreover, USDA loans do not impose prepayment penalty fees, allowing you to pay your mortgage early without worrying about added costs. For borrowers with an existing mortgage, there are USDA refinancing programs that allow you obtain more favorable rates and terms. This can help make your monthly payments more manageable. But if you need to borrow against your home equity, note that USDA loans do not provide a cash-out option for refinances.
If you’re struggling with reduced income but have a good credit history, consider taking a USDA guaranteed loan. Having a good credit history makes you an ideal candidate. You may still qualify for a USDA loan even if a low income makes you ineligible for a conventional mortgage. USDA loans are offered by banks, credit unions, and mortgage companies.
USDA Loans & the COVID-19 Pandemic
With the onset of the COVID-19 pandemic in early 2020, unemployment rates rose as high as 14.7% in April, according to the Bureau of Labor Statistics. Many households struggled to make mortgage payments between April to July 2020. Likewise, a considerable number of homebuyers put their purchases on hold until they could find stable employment. Despite these circumstances, the USDA reported June 2020 applications rose by over 53% compared to the previous year.
How to Qualify for a USDA Loan
The USDA program prioritizes applicants that meet qualifying standards such as income eligibility, area requirements, credit score, and debt-to-income ratio, among others. You must satisfy the following requirements to be eligible for a USDA guaranteed loan:
Choose Property in a USDA Rural Area
As a main requirement, you can only select homes in qualified USDA rural areas. The USDA generally defines rural areas as towns, communities, or small cities occupied by less than 20,000 people. But in other instances, they may approve locations with up to 35,000 residents. These places should not be located in a metropolitan statistical area (MSA) and must lack mortgage credit for low to average income households. Urban areas, meanwhile, are usually defined as places with a population of 50,000 or more.
In 2015, the USDA announced updated guidelines for what they consider as rural areas. This update made it more challenging to get approved for a USDA loan, especially since populations have grown substantially over the last decade. Prior to 2015, over 90% of property in the U.S. qualified for USDA financing.
Though these guidelines may seem too restrictive, extended parts of metro areas in small cities and towns may be eligible. To verify if your area qualifies for a USDA loan, you can check interactive maps on the USDA website. You simply type in the address and it will indicate if the location is eligible or not.
To obtain a USDA loan, you must fall under the required income limit for moderate income. Moderate income is defined as the greater of 115% of the U.S median family income, 115% of the state-wide and state non-metro median family incomes, or 115/80ths of the area low-income limit. These limits are based on both the local market conditions and the size of a family. Household income is calculated by adding the loan applicant’s income plus the income of other family members in a home. This rule applies even if the household member does not share the same family name.
The moderate income guarantee loan limit is the same in any given area for households of 1 to 4 people, and is set to another level for homes of 5 to 8 people. The following table lists examples of limits from a few select areas in the country:
|Location||1 to 4 Person Limit||5 to 8 Person Limit|
|Fort Smith, AR-OK MSA||$78,200||$103,200|
|Northwest Arctic Borough, AK||$157,850||$208,350|
|Oakland-Fremont, CA HUD Metro||$145,700||$192,300|
|San Francisco, CA HUD Metro||$202,250||$266,950|
The floor values on the above limits are $78,200 and $103,200, respectively. Homes with more than 8 people in them can add 8% for each additional member. You can verify income limits in your local area by checking the USDA income limits page.
For example, let’s say the income limit in your area for a 1-4 person household is $78,200 per year. That means you can qualify for a USDA loan with an annual income of $89,930 or less. 15% of $78,200 is equivalent to $11,730, which we added to $78,200 to obtain the $89,930 income limit.
What if I can pay 20% down? Generally, if you can afford to make a 20% down payment on top of your mortgage, you won’t qualify for a USDA loan. If you have assets that exceed the imposed income limits, you likely won’t be approved. But in some cases, a USDA-sponsored lender may approve your loan and require you to make a down payment.
Loan Amount Limits
Loans can be used for regular, manufactured, or modular homes which are no more than 2,000 square feet in size. The effective loan limit starts at $265,400 in low-cost areas and goes as high as $631,000 in expensive (or high-cost areas) in states like California. You can view loan amount limits in your local area here.
As for credit requirements, USDA lenders prefer a FICO credit score of 640. This is the minimum credit score required to qualify for the USDA’s automated writing system. Homebuyers who satisfy this requirement receive streamlined processing of their application. Meanwhile, borrowers with credit scores below 640 (some lend as low as 620) must submit to a manual underwriting process. If you have further credit issues on your record, your application will take longer to approve.
Conventional loan lenders, on the other hand, usually prefer borrowers with a credit score of 680 and above. If you have limited income and an average credit score, consider taking a USDA loan. Again, homebuyers who cannot qualify for a traditional conventional mortgage may be eligible for a USDA home financing.
Improve Your Credit Score
Before applying for any loan, make sure to check your credit report. Borrowers can request for a free copy at AnnualCreditReport.com. Avoiding late payments and reducing your outstanding debts helps improve your credit score. In the long run, having a good credit profile will help you obtain more favorable loan deals in the future.
Debt-to-Income Ratio (DTI)
Like other types of mortgages, borrowers must also meet the required debt-to-income ratio (DTI) to obtain a USDA loan. DTI is a risk indicator which measures the sum of your total monthly debts compared to your gross monthly income.
- Front-end DTI ratio – The front-end DTI limit for USDA loans should not exceed 29%. This is the percentage of your income that pays for all housing-related expenses. It includes monthly mortgage payments, property taxes, homeowners insurance, etc.
- Back-end DTI ratio – The back-end DTI limit for USDA loans should not exceed 41%. This is the percentage of your earnings that pay for your housing-related costs together with your other debts. It includes your car loan, credits cards, student loans, etc.
A low DTI ratio shows you have a good balance of income and debt. This lowers default risk for lenders, which increases your chances of loan approval. On the other hand, a high DTI ratio indicates you cannot take on further debt. DTI requirements for USDA loans are quite similar to conventional mortgages. For conventional loans, the front end-DTI limit is 28%, while the back-end DTI is 43%, but this can be as high as 50% if you have compensating factors.
Comparing USDA Loans & Conventional Mortgages
On regular conventional conforming mortgages, private banks offer funding and typically prefer borrowers that pay 20% down payment of the home’s value. This minimizes the risk of loss to the lender in case a foreclosure takes place. If the borrower pays less than 20% down, they are required to pay private mortgage insurance (PMI). Once the loan balance to home value (LTV) falls below 80%, PMI is automatically cancelled.
On the other hand, USDA loans do not require a down payment, but they are associated with mortgage insurance premium (MIP), which come in two important fees. One is an upfront USDA guarantee fee, and the other is an annual fee which functions similarly to PMI. The upfront fee can be rolled into the loan.
Periodically the fees associated with a USDA loan change to reflect the costs of running the program. The last major change was announced on September 1, 2016, when the upfront guarantee fee dropped from 2.75% to 1%, and the annual fee was lowered from 0.5% to 0.35%. Both the upfront funding fee and the annual insurance premium are far cheaper on USDA loans than the equivalent FHA loan fees.
The following table highlights the cost of these fees on a $250,000 home:
|Fee Type||Upfront Fee||Annual Fee|
|Upfront Amount||$2,500 rolled into loan||$0|
|Equivalent Monthly Amount||$0||$72.92|
As the principal balance is reduced, the associated monthly amount declines.
For example, for a $250,000 loan, your upfront guarantee fee will cost $2,500. If your principal decreases to $230,000, your annual guarantee fee will cost $805, which is $67.84 per month. As your principal balance is reduced, your annual guarantee fee also decreases. The annual guarantee fee is required for the entire life of the loan.
To summarize the difference between USDA loans and conventional loans, we made the table below:
|Qualifications||USDA Loans||Conventional Loans|
|Required Area||Must be a USDA rural area||Choose a home location anywhere|
|Income Limit||Your household income cannot exceed 115% |
of the median income in your area
|Does not impose income limits|
|Credit Score||Should be at least 640 |
Some accept as low as 620
|680 & up is usually approved |
700 & up is ideal
|Rates||Comes with lower rates because of federal funding||You can obtain a lower rate with a higher credit score|
Making a high down payment helps decrease your rate
|Down Payment||Not required Offers 100% financing||20% eliminates PMI|
10% is the average down payment
3% required minimum for a 97-3 loan
|Front-end DTI||Should not go over 29%||Should not go over 28%|
|Back-end DTI||Should not go over 41%||Usually does not go over 43% |
With compensating factors, can be up to 50%
|Cost||1% upfront guarantee fee|
0.35% annual guarantee fee
Does not require prepayment penalty
|PMI costs in 0.5%-1% of the loan amount annually |
PMI is cancelled when mortgage balance is below 80%
May require prepayment penalty
Weigh the Pros and Cons
Besides the benefits, consider the disadvantages of choosing a USDA loan. Since you can only finance a house in a USDA rural area, this option may not suite you. If you work in the city, living too far out may not be a practical choice. Commuting to work daily takes a lot time, money, and energy that you might not have.
Next, income limits may keep you from qualifying for this type of mortgage. If your household earns more than 115% of the median income in your area, you won’t be approved. You should also think of the annual guarantee fee, which is an extra cost you must budget into your mortgage payments.
USDA loans only apply to single family homes. It should also be a primary home, which means you cannot finance an investment property if you’re planning to rent out a house. These loans also follow minimum property standards to ensure the home is livable and safe. If you intend to purchase a house that requires a lot of renovation, a strict appraiser might not readily approve your home.
Before you choose a USDA loan, check if any of these factors might not align with your priorities and needs.
Prepare to Submit Documentation
Like other mortgages, you must submit to credit checks and provide financial documents when you apply for a USDA loan. Be ready to show proof of stable income in the past 24 months. You must submit information about your gross monthly income, total monthly debts, and your assets.
USDA-sponsored lenders screen for a clean credit history. This means your records should not have accounts converted to collections in the last 12 months. But in case of emergencies, if you can prove you were affected by a temporary event outside of your control (such as accidents), you can still obtain a USDA loan.
Make sure to gather the following documents for your application:
- W-2 tax returns
- Pay stubs from the last 2 years
- Documents showing bills and financial obligations
- Proof of U.S. citizenship or permanent residency
- OR proof of non-citizen national status or qualified alien status
Calculate Your Mortgage Payments
USDA guaranteed loans are only available as 30-year fixed-rate mortgages. The long payment term makes monthly payments more affordable for borrowers. And with no down payment required, this sounds convenient for moderate-income homebuyers. However, you must understand that making a small down payment is worth increasing your savings.
Using our calculator on top, let’s estimate mortgage payments with the following example. Let’s say you took a 30-year fixed USDA loan worth $250,000 at 3% APR. The following table compares the cost of making no down payment, a 3% down, and a 5% down on your loan.
- 30-Year Fixed-Rate USDA Loan
- Home Price: $250,000
- Rate: 3% APR
|Mortgage Details||No Down Payment||3% Down ($7,500)||5% Down ($12,500)|
|Upfront Guarantee Fee||$2,500||$2,425||$2,375|
|Monthly Principal & Interest Payment||$1,054.01||$1,022.39||$1,001.31|
|Monthly Taxes, Insurance, & MIP||$381.25||$379.06||$377.60|
|Total Monthly Mortgage Payment||$1,435.26||$1,401.45||$1,378.91|
|Total Interest Costs||$129,444||$125,560||$122,971|
The results show making a small down payment lowers the amount you borrowed. This immediately decreases your upfront guaranteed fee, which is 1% of your loan amount. If you don’t make a down payment, your upfront guarantee fee will cost $2,500. But with 3% down, it’s reduced to $2,425, while a 5% down lowers the upfront guarantee fee to $2,375.
Next, the lower loan amount reduces your total monthly payments. Based on the table, the highest total monthly payment is $1,435.26 when you don’t make a down payment. But with 3% down, your monthly payment decreases to $1,401.45, while a 5% down lowers it to $1,378.91. Paying 3% down saves you $33.81 per month, and a 5% down saves you $56.35 per month.
Savings are most evident when we compare the total interest costs. With no down payment, your total interest will amount to $129,444. But if you pay 3% down, your interest charges will decrease to $125,560, while a 5% down will reduce your total interest costs to $122,971. A 3% down will save you $3,884 on total interest charges, while a 5% down will save you $6,473. The higher your down payment, the more you’ll save on interest costs.
This example shows that making a small down payment will help decrease your mortgage payments. Overall, it significantly reduces your total interest charges over the life of the loan. Even with a zero-down option, it makes better sense to save a small down payment for a USDA loan. Thus, it’s best to save a little down payment before you take this mortgage option.
Homebuyers looking to live away from the city can take advantage of USDA loans. This provides affordable financing for low to average income borrowers, which comes with low rates and a zero down payment option. It also has more lenient credit requirements compared to conventional loans. USDA loans are a good fit for borrowers who have low income, but otherwise have a decent credit rating.
On the other hand, because it’s strictly limited to USDA rural areas, finding the right location may be challenging. It may not be an option especially if you have a stable job in the city. USDA loans also cannot be used for vacation homes or investment property that generates income.
Moreover, you must satisfy income limits to qualify. If your income does not fall within 115% of the median family income in your area, your loan will not be approved. USDA loans also require MIP in the form of an upfront guarantee fee and an annual guarantee fee. The annual guarantee fee is an added cost that’s usually required for the entire life of the loan. But as your loan amount decreases, so does your guarantee fee.
Finally, despite the zero down option, consider making a small down payment. Making a down payment on a USDA mortgage helps reduce your loan amount, which also decreases your monthly payment. In the long run, this will save you thousands of dollars on interest charges compared to not making a down payment at all.
Homebuyers May Qualify for a Low-rate USDA Home Loan
US 10-year Treasury rates have recently fallen to all-time record lows due to the spread of coronavirus driving a risk off sentiment, with other financial rates falling in tandem. Homeowners who buy or refinance at today's low rates may benefit from recent rate volatility.
Don't pay too much for your mortgage. Leverage our lender network to get a USDA loan at today's historically low mortgage rates.
Find Out What Mortgages You Qualify For Today
Check your mortgage options with a trusted lender.
Answer a few questions below and connect with a lender who can help you lock-in a low rate USDA loan and save today!
USDA Rural Housing Loan
What information will ETFCU need to process my application?
- Prior two years addresses and dates of residence.
- Social Security number or tax ID.
- Driver’s license or state issued identification card.
- Prior two years employment information including employer contact and dates of employment.
- Most recent W2 and pay stub for all income sources.
- Two years federal tax returns, including tax applicable schedules if you are self-employed, have rental income, farm income or additional non-W2 reported income.
- Alimony, child support or separate maintenance documentation if you wish to have it considered as basis for repaying this obligation.
- Additional information may be required such as Divorce decree (if applicable) and/or proof of extra income such as rental income, dividends, Social Security, retirement, disability, pension, or welfare (supporting documentation is required).
- Balance owed on all liens attached to the property including all mortgages as well as any home equity loans or lines of credit.
- Most recent mortgage statement (if applicable).
- Most recent property tax bill.
- Most recent hazard insurance declaration page.
- Most recent flood insurance declaration page (if applicable).
Rates accurate as of November 26, 2021 and are subject to change throughout the day. All mortgage rates include Extra Credit Discount.
Loans are subject to credit review and approval. A sample monthly payment on a 30-year fixed loan amount, based on a $100,000 purchase price with $3,500.00 down (3.5% minimum down payment required), no points, monthly payments based on an interest rate of 3.75% interest rate, is $463.12. The payment listed does not include property taxes or homeowners insurance, MI is included. The rate may vary depending on each individual’s credit history and underwriting factors. All loan programs, rate terms and conditions are subject to change at any time without notice. Not available on manufactured homes. Property insurance required. Minimum loan amount may apply. Other restrictions may apply. ETFCU mortgage lending product availability may vary based on property location.
Mortgage options and terminology
In addition to mortgages options (loan types), consider some of these program differences and mortgage terminology.
A mortgage loan term is the maximum length of time you have to repay the loan. Common mortgage terms are 30-year or 15-year. Longer terms usually have higher rates but lower monthly payments. Shorter terms help pay off loans quickly, saving on interest. It is possible to pay down your loan faster than the set term by making additional monthly payments toward your principal loan balance.
Fixed rate vs adjustable rate
A fixed rate is when your interest rate remains the same for your entire loan term. An adjustable rate stays the same for a predetermined length of time and then resets to a new interest rate on scheduled intervals. A 5-year ARM, for instance, offers a fixed interest rate for 5 years and then adjusts each year for the remaining length of the loan. Typically the first fixed period offers a low rate, making it beneficial if you plan to refinance or move before the first rate adjustment.
Conforming loans vs non-conforming loans
Conforming loans have maximum loan amounts that are set by the government and conform to other rules set by Fannie Mae or Freddie Mac, the companies that provide backing for conforming loans. A non-conforming loan is less standardized with eligibility and pricing varying widely by lender. Non-conforming loans are not limited to the size limit of conforming loans, like a jumbo loan, or the guidelines like government-backed loans, although lenders will have their own criteria.
Start your home buying research with a mortgage calculator
A mortgage payment calculator is a powerful real estate tool that can help you do more than just estimate your monthly payments. Here are some additional ways to use our mortgage calculator:
Assess down payment scenarios
Adjust your down payment size to see how much it affects your monthly payment. For instance, would it be better to have more in savings after purchasing the home? Can you avoid PMI? Compare realistic monthly payments, beyond just principal and interest.
Calculate mortgage rates
Modify the interest rate to evaluate the impact of seemingly minor rate changes. Knowing that rates can change daily, consider the impact of waiting to improve your credit score in exchange for possibly qualifying for a lower interest rate. Click the "Schedule" for an interactive graph showing the estimated timeframe of paying off your interest, similar to our amortization calculator.
Fine-tune your inputs to assess your readiness. Use our affordability calculator to dig deeper into income, debts and payments.
Sample loan programs
Adjust the loan program to see how each changes monthly mortgage payments
Frequently asked questions about mortgages
The principal of a loan is the remaining balance of the money you borrowed. Principal does not include interest, which is the cost of the loan.
The down payment is the money you pay upfront to purchase a home. The down payment plus the loan amount should add up to the cost of the home.
Interest rate is the base fee for borrowing money, while the annual percentage rate (APR) is the interest rate plus the lender fees. APR gives you an accurate idea of the cost of a financing offer, highlighting the relationship between rate and fees.
Closing costs for a home buyer are typically 2% to 5% of the purchase price of the home. Depending on loan type, these costs may roll into the mortgage payment or be paid at closing. Agent commission is traditionally paid by the seller.
The cost of private mortgage insurance varies based on factors such as credit score, down payment and loan type.
You should consult with your insurance carrier, but the general thought is that homeowner's insurance costs roughly $35 per month for every $100,000 of the home value.
The current housing market is undeniably red hot. While purchasing a home can be a challenge for anyone, it is particularly tough for a buyer with low income and a low down payment. If you find yourself in that boat, don't count yourself out of the housing market just yet. Maybe you just need the right kind of mortgage. USDA mortgage loans are an often-overlooked way to become a homeowner.
What is a USDA Loan?
The USDA mortgage loan is backed by the United States Department of Agriculture (USDA), and designed to help low- and moderate-income Americans purchase homes. In addition to offering low interest, a USDA loan allows you to buy a home with no money down. The caveat is that a USDA loan can only be used to purchase a home in an eligible rural area.
What is an eligible rural area?
Before images of moving to the countryside fill your head, it's important to know that the USDA interpretation of rural is different from the average interpretation. Yes, you can use a USDA mortgage to purchase a home in the country, but suburban areas also qualify as rural in the USDA's book.
Your first step is to check the USDA's property eligibility website to learn if an area where you would like to buy a home qualifies. If you have any trouble finding an eligible area, ask a real estate agent to help you conduct a quick search. You may be surprised to find how many neighborhoods you have access to.
How does a USDA loan work?
A USDA loan (officially called the "Section 502 Guaranteed Loan Program) helps approved lenders provide home loans to low- and moderate-income buyers. Here's how: The USDA promises lenders it will repay the lender 90% of the loan note if you fail to make your monthly mortgage payments. Knowing this, lenders feel more comfortable working with non-traditional buyers.
Once approved for a USDA mortgage, you are free to purchase, build, rehab, or relocate a dwelling in an eligible area. As mentioned, that eligible area may be out in the country or in a suburban neighborhood that is USDA-approved.
Who's eligible to apply?
To apply for a USDA loan, you must meet these three criteria:
1. Income eligibility
Your household income cannot exceed 115% of the median household income -- for the area in which you hope to buy.
These USDA income guidelines make it easy to learn if you're eligible. To give you an example of what you can expect, here are the current income limits for Grand Junction, Colorado:
In other words, a USDA mortgage cannot be used to pay for a second home or to purchase a rental property.
3. You must be a U.S. citizen, U.S. non-citizen national, or a qualified alien
What makes the USDA loan unique?
Several characteristics set the USDA loan apart from other mortgage programs. They include:
- The interest rate is based on the property's value at the time of mortgage approval or closing, whichever rate is lower.
- The loan term (how long you have to repay the loan) usually stretches to 33 years, but can extend up to 38 years for very-low-income borrowers.
- No down payment is required.
- Although no specific credit score is required to land a USDA loan, most USDA-approved lenders look for a score of at least around 640.
- There is no set acreage limit. If you can qualify for the loan amount on a large piece of land, it is possible to purchase it.
- A USDA loan can cover the costs of repairs and rehabilitation.
- USDA funds can be used to cover site costs, such as grading, seeding or sod installation, walks, fences, driveways, and trees.
- Funds can also be used to purchase essential household equipment, like wall-to-wall carpeting, refrigerators, washers, dryers, ovens, ranges, and heating and cooling equipment.
How to apply for a USDA loan
The USDA has a network of approved lenders, and these lenders are your point of contact. Just as you would rate-shop lenders for a conventional mortgage, comparing USDA lenders is crucial. Some will offer better rates and terms than others, so checking them out can save you thousands in interest over the years.
Perhaps the only fly in the ointment when it comes to USDA mortgage loans is that borrowers are required to pay mortgage insurance fees. Collecting this fee allows USDA to guarantee the loans of all USDA borrowers.
The fee is paid in two parts. First, an upfront guarantee fee equal to 1% of the loan amount is paid at closing, and more often than not, is financed into the loan. Let's say you're borrowing $200,000. An extra $2,000 is tacked onto your loan amount to cover the mortgage insurance fee. The good news is that this fee is 0.75% lower than the mortgage insurance fees paid on FHA loans, and 1.15% less than the insurance fees collected on VA loans.
You also pay an annual fee of 0.35% of the loan balance. While the lender calculates the fee annually, it's split into 12 equal payments, and added into your monthly mortgage payments. Again, let's imagine that your loan balance is $200,000. Your annual mortgage insurance fee is $700. Divided by 12, that adds a little over $58 to your monthly payment.
If you hope to buy a home, but are worried you don't earn enough money or have a large enough down payment to compete, a USDA mortgage lender may make it possible to purchase your slice of the American Dream.
Figuring out what you’ll pay monthly for your mortgage is easy. Just fill in the details, using the mortgage calculator above, to get an estimate of your monthly mortgage payment.
Estimated Home Value:
If you are buying a house, enter the price of the property you are considering. If you’re refinancing your home loan, enter your home’s current value.
If you are buying a house, enter the amount of your down payment. If you are refinancing, enter the amount of equity you have in the property.
Equity = Estimated Home Value - Present Loan Balance
This will automatically calculate for you based on your estimated home value and down payment amounts
Loan Amount = Estimated Home Value - Down Payment
Enter the interest rate you estimate you will pay on your mortgage loan. Your interest rate can vary by the type of mortgage you choose, the term of your loan and the rate for which you qualify. If you are wondering about today’s interest rates, or would like to start the preapproval or application process, contact a mortgage loan officer.
This is the number of years it will take to pay off your mortgage. Typically, a mortgage loan is either a 15- or 30-year term, but there are other options. If you are refinancing your home to a shorter or longer term, you can adjust the term length and see the difference it will make to your monthly mortgage payment. Paying additional dollars each month on your mortgage principal may reduce the length of your term.
Annual Property Tax:
Property taxes vary not only by state, but by county, too. You can estimate your annual property taxes by taking the assessed value of your home and multiplying it by your local property tax rate.
For example, if you want to know the amount of your annual property tax for a $100,000 house in Omaha, Nebraska, you would multiply $100,000 by the Omaha property tax rate of 2.38% for a total of $2,388.00. To estimate the property tax in your city/town and state, visit this website.
Annual Property Insurance:
The premium for your annual property insurance can vary depending on your location and the insurance company that underwrites your policy.