If you’re looking for a way to buy a home in a rural area, you might want to consider a USDA home loan. These loans are backed by the U.S. Department of Agriculture and offer some unique benefits for eligible borrowers. Here are the top five things you need to know about USDA home loans:
1. They have low interest rates and no down payment requirement. USDA home loans are designed to make homeownership more affordable for low- and moderate-income families in rural areas. You can get a USDA loan with a fixed interest rate that is typically lower than conventional or FHA loans. Plus, you don’t need to save up for a large down payment, as USDA loans allow you to finance 100% of the purchase price.
2. They have flexible credit and income guidelines. Unlike other types of mortgages, USDA home loans don’t have a minimum credit score requirement. Instead, they look at your overall credit history and ability to repay the loan. You also don’t need to have a high income to qualify for a USDA loan, as long as your income is within the limits set by the USDA for your area and household size.
3. They have two types of loans: guaranteed and direct. Depending on your situation, you can apply for either a guaranteed or a direct USDA home loan. A guaranteed loan is made by a private lender and insured by the USDA, while a direct loan is made directly by the USDA. Guaranteed loans are more common and have higher loan limits, but direct loans may be available for very low-income borrowers who can’t qualify for a guaranteed loan.
4. They have some eligibility requirements. To be eligible for a USDA home loan, you need to meet three main criteria: you must be a U.S. citizen, permanent resident, or eligible non-citizen; you must plan to use the property as your primary residence; and you must buy a home in an eligible rural area. You can check the USDA website to see if your property and income qualify for a USDA loan.
5. They have some fees and closing costs. Like any other mortgage, USDA home loans have some fees and closing costs that you need to pay. The main fee is the upfront guarantee fee, which is 1% of the loan amount and can be rolled into the loan balance. There is also an annual fee of 0.35% of the loan balance, which is paid monthly as part of your mortgage payment. Additionally, you may have to pay for an appraisal, title search, credit report, and other closing costs.
USDA home loans are a great option for many rural homebuyers who want to enjoy the benefits of homeownership with low costs and flexible terms. If you think a USDA home loan might be right for you, contact a USDA-approved lender today and start your application process.
