What You Need To Know Before Considering a USDA Home Loan

For a first-time home buyer, one of the biggest challenges they come across is coming up with a down payment. However, there are loan types, like USDA home loan programs, that require no down payment at all.

Most people don’t know about the USDA home loan option. Therefore, in this article, we would like to brief you about it. By completing a loan application, following the loan requirements, eligibility requirements and confirming property eligibility, a USDA rural home loan program could be the perfect fit for you.

USDA Home Loans

What is USDA Home Loan, Anyway?

USDA loans are also known as USDA rural development loans. This is due to the fact that they were created to entice USDA eligible families to invest in rural single family housing. By boosting the rural population, it boosts the economy, and lets home buying become accessible to a larger group of people. They’re often ideal for first-time home buyers who believe bank mortgages are out of their reach.

Low mortgage rates, a low down payment, and one annual fee instead of facing mortgage insurance premiums makes these loans an inexpensive option compared to other conventional loans or FHA loans. The next best thing about these rural development loan programs is that they are listed in the first-time home buyers guide, as well as having loan eligibility for repeat home buyers. However, despite the fact that United States Department of Agriculture loans come with low monthly payments, zero down payment and even lower insurance premiums, fewer than 5% of all mortgages are actually USDA.

How the USDA Loan Program Works

The United States Departments of Agriculture (USDA) intends to help people in rural areas attain rural housing of their own with their single family housing guaranteed loan. Rural areas are usually determined based on area population. This is the major reason why most homeowners tend to think that they would not qualify for the loan, especially if they live close to urban areas. However, numerous suburban areas are eligible for USDA home loan programs as well, even though they are very close to major cities.

These loans are actually available to buyers of any background. The location of the property is the determining factor of USDA home loan eligibility. Apart from that, the owner must have the intention of living in that home as their primary residence, which doesn’t make it ideal for obtaining investment properties. Homeowners must also have a household income lower than 115 percent of the areas median income, or according to the USDA income limits in your area.

USDA Home Loan Fees

Beyond the income limit, USDA loans require borrowers to pay 1.00% of their total loan amount in USDA guarantee fees. This amount is generally rolled into the end of your family housing guaranteed loan program, so you don’t have to pay out of pocket with the closing cost of the property. However, if you have the funds available, or would like to take out a personal loan or direct loan to cover those expenses, you are allowed to do so.

USDA Home Loans

How to Qualify and Determine Your USDA Loan Eligibility

Getting a USDA guaranteed loan is easier than most people think. Potential borrowers don’t need to worry about bad credit scores or poor credit history. Most lenders require a credit score of 640, or sometimes even lower, to qualify. Most lenders in eligible areas can offer USDA or simply go to USDALoan.com and get matched up with a USDA mortgage lender.

In addition to new home purchases, USDA loans can be used to complete home repairs and rehabilitation. Your housing repairs, and home improvement projects would be subject to home inspections, and would need to comply with the same rural development guidelines as a new home purchase.

USDA loans are just one of the numerous affordable home loans and grant options available. You could consider a VA home loan if you’re a veteran, an FHA home loan if you meet their requirements. However, if you plan on choosing a new home, or single family housing in an urban area, USDA loan programs are often your best bet.