Most people desire to have a home of their own, but only a few can truly afford it, but with a USDA Rural housing loan, your dreams of becoming a home owner can be achieved. This program is backed by the United States Department of Agriculture and is widely popular.
If you seek to understand what USDA home mortgage is all about and why it’s highly desired, look no further as in this article, we will reveal it all to you. Come along as we journey together and discover all about USDA home loan.
Understanding USDA Mortgage Loans
It’s not enough to blindly commit your money into buying a home without understanding the options available to you. USDA home loan is a financing option that enables low-income earners to purchase affordable homes without a down payment and at low-interest rates too. They are generally offered to people in rural areas and boost homeownership and development in rural communities.
USDA Mortgage: How Does it Work?
USDA home loan operates just like other government-backed home loan options. It requires prospective homeowners to work with USDA approved lenders, then get a preapproval, after which the individual makes an offer for the house. The loan gets appraised before sales are finally closed.
The best part of this home loan option is its zero-down payment. However, there are many other benefits to USDA home loans that many are not aware of. Fortunately, we will be sharing them with you; they include:
1. Most U.S. Residents are Eligible
While it’s true that this loan option is only eligible for those in rural areas, you will be surprised to know that the idea of rural for USDA isn’t a very primitive, bushy area. Just as long as the total population is 35 000 or less, you are qualified for a USDA Home loan. With this, there are about 97% of USDA eligible homes in the U.S.
The term rural isn’t all about a ranch somewhere detached from civilization, but it is rather that beautiful home you have your eyes on. This could be an existing property, newly built ones, modular, manufactured houses, and even townhouses.
There are two types of loans under USDA home loans; they are:
USDA Direct Loan
Here, individuals have direct access to loans straight from the U.S. Department of Agriculture. However, to be eligible, individuals must earn between 50% and 80% of their average local medium income. This type of mortgage usually comes with a longer-term and lasts up to 38 years rather than the usual 30 years; it also has a low-interest rate, thereby making it easy to repay.
USDA Guaranteed Loan
This is the second type of loan and is similar to FHA and V.A. loans. Individuals do not have direct access but are rather required to go through a lender; it also utilizes the household income numbers stated above.
Since the USDA guarantees this loan, they are more stringent on the requirements as buyers are expected to have a credit score of 640.
2. Suitable for Low-Income Earners
Although this type of mortgage may appeal to all classes of people, it’s not for everyone. Before your application can be granted, lenders access your household income, and if you earn less than 115% of the region’s median income, you are eligible. The USDA’s income limit is usually a reflection of the cost of living, family size, location, and many other factors.
3. USDA Mortgages are Meant for Primary Residences
If you are searching for a vacation home or a rental property, then keep moving as the USDA home loan isn’t what you are looking for. USDA property eligibility is reserved specifically for primary residences or simply put; it’s meant for those who intend to live in their USDA homes most times.
4. Bankruptcy and foreclosure do not limit USDA loans.
We understand that times can be a bit hard for some people; if you face financial difficulties, not to worry, you can still own home as a USDA home loan isn’t limited by bankruptcy or foreclosure.
However, you are required to wait for three years to qualify for USDA loans if you faced chapter 7 bankruptcy or foreclosure. There are exceptions to this; however, it is usually treated on a case by case basis.
If it’s a chapter 13 bankruptcy, the waiting period is one year; but you will have to make prompt payments for one whole year.
You will agree with me that home loans USDA are very appealing, straightforward, and easy to access, and if you are eligible for it, then there is no reason to consider other types of mortgages. With USDA home loans, your dream of becoming a homeowner can be achieved. So, go ahead and apply for a USDA loan; it’s the first step to having that dream house.