Do USDA Loans Require Mortgage Insurance?


To start off, a USDA home loan is a home loan option that is targeted towards individuals that own or are looking to own rural property. This type of home loan is offered by the United States Department of Agriculture. One of the main perks of this home loan option is it requires no down payment. A USDA home loan is perfect for an individual looking for an affordable option to either become a first time home buyer or a repeat home buyer in permitted rural locations. With no required down payment, USDA home loans come with extra costs in order to decrease the risk the mortgage lender assumes. Frequently, mortgage insurance would be this offsetting cost in order to reduce risk. Let’s dive deeper into the question of whether USDA home loans require mortgage insurance.

As it was discussed earlier, USDA home loans do not require any down payment, which, with conventional and FHA loans often is a difficult hurdle to overcome as they require anywhere from 3.5% – 5% down.. This is a significant benefit of a USDA loan and allows an individual to have more flexibility within their lives and put their cash toward other priorities or needs. Mortgage lenders will require the borrower pay for mortgage insurance in order to help the lender better about the risk they are taking on. So, yes, a USDA home loan requires mortgage insurance regardless of down payment amount and for the life of the mortgage. Mortgage insurance protects the lender in case the borrower defaults on their loan.

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