Everything Prospective Homeowners Need To Know About USDA Loans!

The big American dream of homeownership might get muddled for some people, who don’t have the money to opt for a conventional loan by paying the down payment. A good alternative for military personnel is VA loan, but if you are an ordinary civilian, you don’t have that choice. This is exactly where USDA loans comes in handy. There are websites like usdaloan.com that offer considerable information such loans, but before you get into the details, here’s a quick take on the basics.

What exactly is a USDA home loan?

In case you don’t mind having a home in the rural or suburban areas, you can opt for a USDA home loan, which is offered by United States Department of Agriculture. This kind of loan doesn’t require down payment and can be used for buying properties outside city limits. Please note that USDA home loans can only be availed for buying single-family homes. In case you are considering applying for the same, you should know that USDA loans do offer 100% financing, but the eligibility criteria must be met. Besides the obvious advantage of 0% down payment, the insurance fee on such loans is just 0.35% monthly, which is almost half of what you would pay for a bank loan.

What are different USDA loan programs?

There are three different choices when it comes to USDA loan programs. Here’s a look-

  1. Loan guarantee. In this case, the USDA works with a local lender to guarantee a mortgage, and thereby, the borrower can get a lower interest rate, even when the down payment is zero. Mortgage insurance, however, must be paid for.
  2. Direct loans. Yes, USDA does offer direct loans, but this is only applicable for extremely low-income earning individuals. Interest rates are extremely low, often about 1%, but it is dependent on the location.
  3. Home improvement loans/grants. USDA also offers financial assistance for homeowners to upgrade their homes, which doesn’t exceed $27,500. This can be a loan, or a mix of loan and grant.

How to apply for USDA loans?

There are various USDA loan specialists, who can help you in getting a better idea of your eligibility. There are norms that must be met, both in terms of credit and income. If you provide tax returns, employment details, and statements from the bank with other details, it is possible to get pre-approved. Once you are done with all of that, you must select a home that’s located in the regions recognized by USDA. USDA Mortgages are not hard to get if you seek help from the right place, but only properties located in rural areas identified by USDA can be purchased. The house you buy should be your primary residence.

As far as eligibility is concerned, the applicant needs to be a citizen of the US, should have a stable income for more than 24 months, and must be able to pay the monthly payment, which should be again less than 29% of the monthly income. Check online to find more details.

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