Are you a city-slicker looking for a change of scenery? Lucky for you, the United States Department of Agriculture (USDA) created a home loan that is meant for people who are looking to live further off the grid. Let us introduce you to USDA loans and what you need to know about them.
First things first, USDA home loans are NOT for farmers. This program might hold that preconception, however, this loan is available to anyone looking for a residential property in an eligible rural or suburban area. The USDA’s definition of rural is pretty lax, so make sure to check their property eligibility maps to see if the area you’re interested in meets their definition.
There are many benefits that make this loan program appealing.
• No down payment
– You read that right. USDA loans allow buyers to finance a home for up to 100%* of the price so there is no down payment requirement.
• Lower credit scores are acceptable
– Don’t worry if you have less-than-perfect credit. Scores of 640 and higher will have faster processing, while 640 and below might face more strict underwriting standards.
• No loan limits
– The USDA does not have loan limits in place. That means your purchasing power may be higher than it would be with another loan program. Your lender will be able to help you determine how much you qualify for.
• Multiple property types
– Eligible property types include existing, new construction, condos, town homes, manufactured**, modular, and short sales or foreclosed homes.
What are the requirements?
Legal U.S. citizen and 18 years or older
The home must be for primary residence
Stable and dependable income
Adjusted household income is equal to or less than 115% of the area median income
Most other requirements for a USDA loan are very flexible, including credit and employment history.
*100% financing, no down payment is required. The loan amount may not exceed 100% of the appraised value, plus the guarantee fee may be included. **Only new manufactured homes are permitted, and they must come from eligible dealerships.