USDA loans help first-time home buyers – and we’re not just talking about farmers and ranchers. The agency’s rural development program covers a lot of land, from undamaged rural acres to suburban land perfect for porches.
While loans without a down payment are the main draw, low interest rates and even grants for qualified homebuyers alleviate the situation.
Our USDA Mortgage Calculator can help you calculate the numbers to see if the home you’re looking for fits your monthly budget.
How we got here
What is behind the numbers in our USDA mortgage calculator
No mortgage calculator will figure out what your monthly payment will really be – too many variables are subject to change. Your home insurance premium might end up being higher than you expected, or maybe you’ll get a slightly different interest rate than what you enter.
But the NerdWallet USDA Loan Payment Tool is a true PITI mortgage calculator, which means we include both principal and interest. We take the process a step further and also consider taxes and insurance.
The amounts taken into account for taxes and insurance are estimated, but this is much more precise than not considering them at all.
Most importantly, we add the mortgage insurance premium – the USDA calls this a guarantee commission – into the payment calculation. The USDA requires a monthly insurance premium of 0.35% of the total cost of your loan, to help the government cover the cost of defaulted loans.
How to use the USDA mortgage calculator
First of all, a big pat on the back for all the research you do. Using our USDA Mortgage Calculator helps you decide with confidence how much house you can afford.
Step by step, here’s how the NerdWallet USDA Home Loan Calculator works:
USDA loans usually don’t require a down payment, but you can enter a number here if you plan on depositing money. Zero also works.
Then enter the interest rate you think you qualify for. Our mortgage rate tool can help you identify this number.
Finally, select the length of your repayment – 15 or 30 years.
The results will show your total monthly cost and the total cost of the loan for the term you have chosen.
You can also choose to break down monthly or total costs in detail. Now that you have a good idea of the cost of your loan, you will be ready to buy the best lender USDA for your particular situation.
There are a few other considerations:
What loan term should I choose? Many people default to a 30-year USDA loan for no other reason will their monthly payment be lower. However, if this is a starter house or if you plan to move in about five years, a 15 year period could be considered. It’s likely that you’ll build your home equity faster with a shorter term – and with the lower interest rate on a USDA loan, you might find that the monthly payment is within your budget after all. .
What about a variable rate mortgage? If you’re looking for an ARM, a USDA mortgage might not be right for you. There are no adjustable rate mortgages on the USDA menu. You can only choose two formulas, both fixed: 15 and 30 year loans.
Does this house fit my budget? The last thing you want is a monthly payment surprise. Our USDA Mortgage Calculator includes some of the “hidden costs” of a mortgage, including taxes and insurance, as well as USDA guarantee fees. Remember, however, that these costs are estimated. You will probably want to leave a little cushion in your budget.
Do I have to make a deposit? You’re frowning right now, aren’t you? Make a deposit? It’s a loan from the USDA; I didn’t think I needed a down payment. This is a calculator; play around with a few scenarios, maybe one where you deposit a small amount. This will reduce the total interest you pay over the long term and your monthly payment.
Monthly mortgage payment USDA 101
What are the monthly costs built into a USDA mortgage payment?
Many mortgage calculators only consider principal and interest. Here’s what’s behind the NerdWallet USDA Mortgage Payment Calculator:
Main: This is the amount of your loan. If you make a down payment, it is subtracted from your capital.
Interest: The cost of borrowing money, expressed as a percentage. If you look at the breakdown of total costs, you will see the amount of interest paid over the life of the loan.
USDA warranty fees: Often referred to as “mortgage loan insurance,” this is an upfront fee – and a monthly premium – collected by the USDA. It helps the government cover the costs of borrowers who default on their loans.
Property taxes: Often assessed annually, this is an estimated tax amount. It is usually integrated with your payment and drawn from an escrow account. This calculator assumes that the tax will be 1% of the value of the property each year, but the actual amount you will pay may be higher or lower depending on where you live.
Home insurance: Borrowers demand that you insure your home, and this is an estimate of that cost. We assume 0.3% of the home’s value each year, but the amount could be different depending on your particular situation.
Can I reduce my USDA monthly payment?
The best use of the USDA Mortgage Calculator is the reality check it provides. If it indicates a monthly mortgage payment outside of your comfort zone, you can:
Extend the term of the loan: Going from a 15-year loan to a 30-year term will lower your monthly payment. You will pay more interest over the life of the loan, but you can always refinance for a shorter term when you are able to afford a higher monthly payment.
Shorten your wishlist: You may need to buy a smaller house and cut out your list of “must have” amenities. Lower expectations usually come with a lower price. In addition, you can always renovate your home and update its equipment later.
Deposit money: Even though USDA mortgages usually don’t require a down payment, you can reduce the monthly portion of your budget by reducing your loan amount. It will also reduce USDA’s initial and ongoing warranty fees.
Can my USDA monthly payment increase?
If you like the results you see from the USDA Mortgage Calculator, you’ll also want to know what could increase your monthly payment.
If your credit score goes down between now and when you get approved for a loan, your interest rate – and therefore your payment – will go up. This is a good reason to wait for the opening of new lines of credit to buy furniture or a new giant flat screen.
Property taxes and home insurance premiums shown here are estimates. They could be higher, and these costs will likely increase over time after you buy your home.
Late mortgage payments will result in penalty charges that will be due in addition to your regular monthly payment.