USDA Loan Rates

The interest rate on your USDA loan is part of your mortgage’s overall cost. Lower USDA interest rates mean lower monthly payments and lower interest charges throughout the lifespan of your mortgage. With additional costs like the amount of private mortgage insurance, even saving a few dollars every month quickly adds up over a 30-year fixed USDA-guaranteed loan.

Backed by the Department of Agriculture and geared to low- and moderate-income borrowers for eligible rural areas only, USDA loans can help buyers thanks to their competitive interest rates, which are often lower than those available for conventional mortgages. While USDA loan criteria vary by lender and depend on the borrower’s financial status, their low interest rates are one of the main benefits that make USDA loans highly attractive for eligible borrowers.

Let’s examine what fixed rates are, how a fixed rate works on a housing-guaranteed loan program, and how they affect the overall monthly payment.

What Affects USDA Home Loan Rates?

USDA loan rates today, like other mortgage rates, are influenced by many factors.

The base USDA loan interest rate is tied to current market conditions and economic indicators. For example, as of September 2024, the base rate in the United States is 5.5%. This rate is determined by the Federal Reserve System, the United States’s central bank, and is frequently published in Federal Register Notices and Federal Register Publications.

While a mortgage calculator can give you an indication of the final costs, banks add their own costs in addition to that rate. They also evaluate the risk to their loan based on extra factors such as the borrower’s minimum credit score and line of credit, USDA income limits, debt-to-income ratio, and loan amount terms. 

Picture current USDA mortgage rates as representative of a borrower’s creditworthiness. Borrowers with higher credit scores and lower debt-to-income ratios may qualify for a more favorable mortgage rate because lenders perceive them as financially stable and responsible. 

Conversely, borrowers with less-than-stellar credit scores and accumulated debts are perceived as risky because their credit history and current financial situation are shaky.

Fixed Interest Rates for USDA Home Loan

USDA direct loans offer only fixed-rate mortgages. This means that once your interest rate is set at the beginning of your loan, it remains constant throughout the life of the mortgage.

Fixed loan interest rates provide stability and predictability in your monthly payments: you know how much your mortgage payments will be, so you can program your finances beforehand. Fixed interest rates also protect you from potential interest rate increases in the future. However, you won’t benefit from the reduction if interest rates drop.

How USDA Interest Rates Are Calculated

Lenders will calculate your interest rate, taking into consideration several features.

They start with the base rate mentioned above, which is typically tied to a financial index. Then, they add a margin based on the lender’s costs and risk assessment. That’s where DTI and credit scores come into place.

For USDA loans, this risk assessment considers the government guarantee, which often results in a lower rate than conventional loans.

How Interest Rates Affect Your USDA Mortgage

Your interest rate has a significant impact on your loan.

Monthly mortgage payment

First and foremost, it directly affects your monthly payment. A lower interest rate means a lower monthly payment, making the loan more affordable over time. For example, on a $200,000 loan with a 30-year term, the difference between a 3% and a 4% interest rate could mean a difference of about $100 in your monthly payment.

Interest charges over the lifetime of a mortgage

Your interest rate affects the total amount you’ll pay over the life of the loan.

Even a small difference in interest rate can result in thousands of dollars saved or spent over  30-year loan terms. For instance, using the previous example, the 1% difference in rate could mean a difference of over $35,000 in total interest paid over the life of the loan. When seen in this light, even minute differences in interest rates can have a significant impact.

Building equity

The interest rate also influences how quickly you build equity in your home.

With a lower interest rate, a larger portion of your monthly payment goes toward paying down the principal balance of your loan, especially in the early years of the mortgage. This means you build equity faster. This higher equity will come in handy if you plan to sell your home or refinance in the future.

Annual Percentage Rate (APR)

While the interest rate is important, you should also consider the Annual Percentage Rate (APR), which includes the interest rate plus other loan costs such as mortgage insurance and closing costs.

The APR provides a more comprehensive view of the total cost of the loan.

Competitive Interest Rates for Your USDA Loan

Are you a farmer or rancher looking for USDA eligibility for your primary residence? Do you work from home and love the countryside? Are you retired and tired of the city? 

All types of USDA loans offer competitive interest rates, which can positively impact the amount of money you spend on your mortgage payments. If you’re interested in a USDA loan but uncertain about laws and regulations, compare offers from multiple lenders. Each lender will offer slightly different rates and have a different policy. 

Here at Society Mortgage, we offer excellent interest rates on your USDA direct loan program. Our Loan Officers will be happy to assess your financial situation and offer a competitive interest rate on your loan. Our goal is to help you achieve your homeownership dreams. 

Do you need the best mortgage lenders to provide assistance on home loans or loan applications? Call Society Mortgage to find a program tailored to your financial status, get a USDA loan today, and buy a home in a rural or suburban area tailored to your needs!