USDA Loan Interest Rates

USDA Home Loans are guaranteed by the United States Department of Agriculture, which provides approved USDA Lenders with the ability to offer highly competitive interest rates. Rural and suburban homeowners who are eligible often find that the USDA Home Loan program rates are lower compared to FHA or conventional loans.

What Determines My Rate?

You might be surprised to learn that there is actually no one given rate at any one time. This is due to the fact that there are many factors that make each individual’s mortgage rate different. However, even with the uniqueness of every financial portfolio, there are sever pillars that are looked at when determining your USDA Loan rate.

Current Market Conditions

It all starts with the Federal Reserve and the Federal Funds Rate. The Federal Funds Rate influences interest rates across the board – from prime rates to discount rates and of course, USDA Loan rates.

Credit Score

With the USDA Loan, most lenders expect a credit score of at least 620. The greater your credit score is, generally the better your mortgage rate will be. However, even if your credit report isn’t glistening, you may still qualify since USDA Loans are backed by the federal government.

Debt-to-Income Ratio

Your debt-to-income ratio is exactly what it sounds like: the amount of debt you have in the form of mortgages, auto loans, student debt and credit cards, compared to the amount of income you bring in. Your debt-to-income ratio is a signal of how much you can afford, and is used by lenders when weighing risk.

USDA Loans require borrowers to have a debt to income ratio that does not exceed 41 percent. This is to ensure you can afford making the payments on the prospected home. However ratios can be extended up to 34/47 with certain compensating factors. It is best to speak with a USDA specialist to see if you qualify.