Let’s dig into the good — and the not-so-obvious — so you can make an informed decision.
Zero Down Payment Required
USDA loans allow qualified buyers to finance 100% of the home’s purchase price. That’s a huge relief for those who haven’t been able to save a large down payment.
Competitive Interest Rates
Because USDA loans are backed by the government, lenders often offer lower rates compared to conventional loans or even FHA loans.
Seller-Paid Closing Costs
USDA guidelines allow the seller to pay up to 6% of the home’s price toward your closing costs. In some cases, buyers can get into a home with very little out-of-pocket expense.
Even with a low interest rate, financing the full price of a home means you’ll have a larger loan balance, which equals a higher monthly payment — especially in the current rate environment where many mortgages are hovering in the 6–7% range.
In some areas — particularly those with risks of wildfires, hurricanes, or hail — insurance premiums have gone up significantly. This higher cost becomes part of your monthly mortgage payment and affects your debt-to-income (DTI) ratio, which is a major factor lenders use to determine if you qualify.
Taxes vary widely by city, county, and even neighborhood. In areas with higher property tax rates, monthly payments can be several hundred dollars more than in nearby towns. And yes — this affects your DTI ratio, too.
Get Insurance Quotes Early
Don’t wait until the last minute. Know what insurance will cost for the home you're interested in before you commit to it.
Check Local Property Tax Rates
Property taxes can significantly impact your monthly payment. Look into the local rate and ask your lender to estimate your full monthly cost — not just principal and interest.
Explore Homestead Exemptions
Some states, like Texas, offer homestead tax exemptions for primary residences that can reduce your annual property tax bill. It’s worth looking into if you plan to live in the home long-term.
Consider Higher Insurance Deductibles
Choosing a higher deductible can help reduce your monthly insurance premium. Just make sure you have an emergency fund in case you ever need to file a claim.
Know Your Debt-to-Income Limits
Financing 100% of the purchase price, along with higher insurance and taxes, might push your DTI above USDA loan limits — usually capped around 41% without compensating factors. This can make it harder to qualify.
USDA loans are a fantastic tool to help people become homeowners with little to no upfront cost — but that doesn’t mean it’s always cheap month-to-month. Your interest rate, insurance premiums, and property taxes all come into play, and when you’re financing the full price of the home, every dollar counts.
Do your homework. Run the numbers. Ask questions. A great mortgage starts with great preparation — and knowing the full story helps you avoid sticker shock when that first payment is due.
If someone is currently disqualified, they should be given clear direction on what to fix:
Here Is A Sample Of A Hypothetical Loan Scenario
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Mark Crunk | NMLS #2267612 | Barrett Financial Group, L.L.C. | NMLS #181106 | 275 E Rivulon Blvd, Suite 200, Gilbert, AZ
85297 | AK AK181106 | CO | MO | NC B-203722 | Equal Housing Opportunity | This is not a commitment to lend. All loans are
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