With the housing market finally starting to regain footing, potential home buyers are in search of homes and mortgage loan programs. There are so many types of home loans out there, it’s hard to know which to choose. Maybe you've heard about the USDA (United States Department of Agriculture) home loan. For the right borrower, USDA home loans can be an excellent alternative to conventional loans.
What is the USDA Loan?
The USDA loan is a mortgage loan that’s offered by the United States Department of Agriculture and available to borrowers who own or live on rural properties. The USDA loan does have certain requirements. For instance, the borrower must be able to put up two percent of the property’s purchase price as a funding fee and must also pay a monthly mortgage insurance premium. The premium is based on the balance that’s still owed each year.
Who Qualifies for a USDA Loan?
To qualify for a USDA loan, the borrower must not have sufficient housing, but must be financially able to make the monthly mortgage payments, the property taxes, and any required insurance. The borrower must also meet the income guidelines set by the program; income guidelines change annually.
The income guidelines are based on the county in which the borrower lives. The income of everyone living in the household is used to determine eligibility. The program does allow certain deductions to be taken into consideration, and these deductions may help to make the borrower eligible for the program. The borrower must also have a decent credit history, but not necessarily great credit.
What Type of Borrower Benefits From a USDA Loan?
The USDA loan program benefits several types of borrowers because they offer single-family housing, multi-family housing, business programs, and water and environment programs. The USDA loan is exceptionally popular because it benefits borrowers who can’t afford down payments or closing costs. The program doesn’t require a down payment and allows the closing costs to be added into the loan.
Borrowers who don’t have excellent credit can also benefit from a USDA loan because it doesn’t require excellent credit. If the borrower has less-than-perfect credit, he or she can use unconventional sources as credit references such as utility, cell phone or insurance companies. The USDA also offers interest rates that are lower than conventional mortgage loans.
How Do I Apply for a USDA Loan?
Individuals interested in applying for USDA loan can visit their local Department of Agriculture or can visit the USDA Rural Development website. The website offers not only valuable information on anything a potential borrower may want to know but also allows the borrower to apply online. It also gives state- and county-specific information regarding income guidelines based on specific family sizes.
If you live in a rural area and wish to become a homeowner, a USDA loan may be the ideal program for you and/or your family.
