What is A USDA Loan And Can I Get One?
Owning a home is a dream for millions of Americans, but it can often seem out of reach if you have trouble finding a mortgage. However, the government has taken numerous steps to help make it a reality, and today it's possible to use different programs to get your loan and buy that dream home.
The USDA home loan is one of the least-known types of mortgage programs out there today, but it could help make it much easier for those in rural areas to get a home loan and become a homeowner.
What Is The USDA Loan?
The USDA loan is a type of mortgage loan that requires no money down and applies only to those in eligible rural areas. It's also called the USDA Rural Development Guaranteed Housing Loan Program and is backed by the US Department of Agriculture. In 2017 alone, it helped 127,000 people buy and upgrade their homes, and its ultimate goal is to help improve the economy and quality of life in rural America.
Some other points to note about the USDA loan include the following.
- It often issues mortgages to those in the greatest need, including those unable to secure a home loan elsewhere, those without decent, safe housing, and those with a low level of income
- Only rural areas are eligible for the program, though some suburbs qualify
- USDA loans are generally only offered for homes of 2,000 square feet or less, and homes that have a market value below the loan limit. These limits can be as low as $100,000 in some places but will vary from state to state and even from county to county.
The bottom line is that the USDA loan is an opportunity to become a homeowner despite the challenges your situation may have, and it's worth looking at for those who have been unable to get their own home through other means.
The Three Types Of USDA Loans
There are actually three USDA loan programs. These are:
- Direct Loans - These are for the lowest income applicants, and could have interest rates as low as 1 percent in some instances. Income limitations vary based on location.
- Loan Guarantees - The most common option, these are mortgages that are issued by a lender but backed by the USDA. It's similar to the FHA loan or VA loan programs and could provide low-interest rates and no down payments.
- Home Improvements - Those who qualify for these loans will receive money that allows them to repair and upgrade homes using as much as $27,500. Grants and loan amounts could vary depending on location and your income, but for those buying or living in a 'fixer upper', these are good options.
Who Is Eligible?
You'll still have to meet basic eligibility requirements in order to get a USDA loan. Some of these requirements include the following.
- Must be a US Citizen
- Must have a dependable source of income, usually at least 2 years at the same job
- A decent credit score with no accounts going to collections over the last year
- The monthly payment of the loan can't be higher than 29% of your monthly income
It's important to note that income limits do apply, but they vary greatly by location and by the size of your household. And, remember that those with higher credit scores will usually receive streamlined processing, better debt ratio requirements, and other benefits.
If you're looking for a home in a rural area and have struggled to get a loan, the USDA loan could help. Contact us today to find out more about your options.