One of the main obstacles to home ownership is coming up with that massive down payment. Here in Klamath Falls, the average home sells for over $250,000! With a conventional 20% down payment, you’d need to save about $50,000 to even get started. Fortunately, the times have changed and there are many mortgage programs which only require 5%, 3.5%, or 3% down. For many though, even $7,500 (3% of $250,000) is an unrealistic savings goal. Enter the USDA Single Family Home Loan Guarantee.

This program offers 100% financing for eligible applicants on approved properties. Sound too good to be true? Keep reading to learn about the program requirements. We’re going to dispel some common myths about USDA loans as well.

Who May Apply?

While guidelines are always subject to change, currently you may be eligible if:

• Your household income doesn’t exceed 115% of median household income for the area
• You agree to use the property as your primary residence
• You are a U.S. citizen, non-citizen national, or Qualified Alien
• You cannot obtain conventional financing with no PMI
• You are not suspended or debarred from participating in federal programs

According to census.gov, the median household income for Klamath County in 2020 was $48,560. Data changes frequently, but that would give an adjusted figure of about $55,844 in household income to remain eligible for this loan program.

Which Properties are Eligible?

Almost the entire state of Oregon, including Klamath County, is eligible for the USDA Single Family Home Loan Guarantee. Use this link to see if a specific address is eligible: https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp

In addition, the property must meet the following requirements:

• Must be a single-family home (which can include detached, attached, PUD, condo, modular, and manufactured homes)
• Property cannot be an income generating property
• Must meet HUD 4000.1 standards (read them here: https://www.hud.gov/sites/dfiles/OCHCO/documents/4000.1hsgh-112021.pdf)
• Be modest for the area – this typically limits home size to under 2,000 square feet

USDA Loan Guarantee Myths

There are many misconceptions about the USDA home loan program. The best way to be sure you have the most accurate information is to speak directly with a local lender. If you aren't sure where to start, check this list for an approved lender near you.

MYTH 1: USDA loans are only for farmers.

USDA loans are for anyone meeting the eligibility requirements. Nowhere do they say you must be a farmer. Many USDA eligible properties are located in cities, including right here in Klamath Falls.

MYTH 2: Only 1^st time home buyers qualify for USDA loans.

You can be on your first or 10^th home and still qualify for a USDA loan, assuming you and the property meet the remaining criteria.

MYTH 3: USDA loans take forever to close!

Also not true; current average close times are 30 – 45 days. That’s right in step with the conventional market in Klamath County.

MYTH 4: USDA loans are less likely to close.

The most important part of ensuring your loan will close is choosing a lender that is experienced in USDA loans. If all the paperwork has been filled out correctly, it is very rare for a USDA loan to not close.

MYTH 5: The property must be in perfect condition to qualify for a USDA loan.

USDA loans typically allow for funds to be allocated toward repair expenses AFTER the loan has closed. This means that the property doesn’t have to be pristine to qualify. Health and safety concerns must be addressed, but cosmetic issues and small repairs can often be taken care of later.

Whether you have plenty of cash saved for a down payment, or you aren't sure if you even qualify for a home loan, every journey starts with the first step. Contact a Realtor (like Fairfield Realty) or a local lender to help you get started. There are plenty of mortgage options and programs available to help make your dream of home ownership a reality.