A California USDA Guaranteed Rural Development Home Mortgage Loan is a flexible no down payment government insured program that is growing in popularity for Inland Empire residents and other rural areas of California. It’s designed to promote home ownership for low to moderate income earners who have limited savings for a down payment. The USDA loan will actually lend up to 102% of the home’s appraised value and even allow the buyer to include closing costs in the actual loan (appraisal permitting).
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A common misconception about the USDA loan program is that it’s only for farmers. There are many areas in Riverside County such as Menifee, Sun City, Wildomar Winchester, French Valley, and parts of Temecula, Murrieta and Corona that qualify for the USDA home loan.
USDA Rural Home Loan Guidelines:
- 102% Financing
- No Down Payment
- Loan Amounts up to $417,000
- No Cash Reserve Requirements
- 6% Seller Contribution Limitations
- 100% Gifted Closing Costs allowed
- 30 year low fixed rate loan
- No Prepayment Penalty
- Primary Residents only (no rentals/investments)
- It’ possible to ‘roll’ closing costs into the loan
- Non-borrowing spouse must disclose debt
Like FHA & VA, USDA doesn’t actually fund loans, but instead guarantees them, which makes them safer investments for lenders.
USDA Property Eligibility
USDA requires the home be located in a California USDA eligible rural area.
- Riverside County USDA Eligible Areas: Temecula (Redhawk), Murrieta (partly), Sun City, Menifee, Quail Valley, Winchester, French Valley, Wildomar, Homeland, Romoland, Nuevo, Corona (Horse Thief Canyon area), Cherry Valley, Cabazon, Calimesa, Desert Hot Springs, Coachella, and Thousand Palms.
- San Bernardino County USDA Eligible Areas: Adelanto, Big Bear City & Lake, Crestline, Lake Arrowhead, Lucerne Valley, Needles, Running Springs, Twentynine Palms, and Yucca Valley.
- San Diego County USDA Eligible Areas: Alpine, Borrego Springs, Ramona, Valley Center, Julien, Rainbow, Bonsall, Valley Center, Pauma Valley, and parts of Fallbrook.
USDA Income Limits
Must meet California USDA adjusted annual household income limits - a maximum 115% of the median income for your area. Meaning your total combined household income cannot be more than this amount.
Special Note: USDA does not allow pools to add value to the appraisal value, making it difficult to finance a pool home.
County ____________________1 to 4 person_______5 to 8 person
Riverside County USDA Loan: $77,050 $101,700
San Bernardino County USDA Loan: $77,050 $101,700
San Diego County USDA Loan: $95,000 $125,400
If your income is slightly over these amounts, there are little known ‘deductions’ that can be used to reduce your qualifying gross household income and help you qualify. Such as:
- Disabled or handicapped individuals who are not the applicant or co-applicant
- Documentable childcare expenses for children 12 years of age or younger
- Documentable medical expenses for family members 62 years of age or older
- Attendant care expenses
- Deduction for each child under the age of 18 and/or full time student over 18
USDA Qualifying Income
It’s important to note that USDA uses two types of income for qualifying. Borrowers must not exceed the maximum allowable Household income, which is the combined gross income of all people living in the home, regardless if they will be on the mortgage. This amount cannot be higher then the county limits. The other income used is the Repayment income. This is income from the actual loan applicants and determines the DTI (debt-to-income) ratio. This impacts how much you qualify for.
USDA Maximum Loan Amount
USDA has not set a maximum loan amount but $417,000 seems to be the consensus by most lenders. Your max qualifying loan amount is determined by your DTI ratio. USDA has set 29/41% as the max DTI, but often allows up to 47% with a GUS automated approval and a FICO score over 660.
If you would like to get approved for a California USDA home mortgage loan or just want more details on this program, call Brad Yzermans @ (951)-215-6119.