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.
• 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.
Most other requirements for a USDA loan are very flexible, including credit and employment history.
Are you’re ready to leave the city behind? A USDA loan may be right for you! If you have questions about buying a home with a USDA loan, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!
*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.
Over the past several months, we have answered the top questions about the top mortgage loan options. Our final blog in this series will answer the top 5 questions about United States Department of Agriculture (USDA) loans. If you are considering buying a home, read on to find out whether a USDA loan might be the right choice for you.
USDA Loans
USDA home loans are insured by the United States Department of Agriculture. This loan program allows low- and moderate- income households to purchase homes in eligible rural areas. Home buyers who do not qualify for a conventional mortgage may be able to purchase a home with a USDA loan.
If you are looking to purchase a home in a rural area, a USDA loan may be the right financing option for you. For more information about USDA loans, please visit the USDA website. If you have more questions about buying a home with a USDA loan, contact one of our licensed Mortgage Loan Originators. If you are ready to begin the home buying process, click here to get started!
*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. Loan is limited to the appraised value without the pool, if applicable.
Definition
USDA or “Rural Development” home loans are given to qualified borrowers looking to buy or refinance a home in a rural location. These loans are government insured by the USDA, and are usually for low to middle income households buying a home for primary residence. USDA loans have special features that differ from conventional loans which attract buyers who have typically been denied for other loans, yet still are looking for a way to afford a home.
Benefits
The most desirable aspect of a USDA loan is that down payments are not required. This allows buyers to finance a home for up to 100% of the price. There is no limit on the price of a home to apply for a USDA loan either. Along with these benefits, 30-year fixed interest rates are offered, allowing lenders to provide competitive interest rates based on the buyer’s qualifications. Also, beginning September 2014, 15-year fixed rate mortgages will also be available.
Requirements
To obtain a USDA loan, the buyer must be a legal US citizen and 18 years or older. The home must be for primary residence and not in commutable distance of another home owned by the buyer. Most other requirements for a USDA loan are very flexible. Although the home must be located in a rural area, the definition varies so that most small towns, suburbs and exurbs are acceptable. Typically a town with 20,000 people or less is an eligible location. Credit history, employment history, and income eligibility are all very negotiable requirements; however there are recommendations that will increase your eligibility.
A minimum credit score of 640 is commonly preferred; however, there have been many exceptions made to that specific score. There are limitations for income as well that your lender can evaluate based on the location of the home and the income of neighboring occupants. Proof of employment or some sort of consistent income is important to show that making payments is possible. Generally, a 2 year history of employment is desired, however this isn’t a definite requirement. Mortgage principal, interest, taxes and insurance (PITI) is also recommended to be less that 29% of monthly income, but again, this exact percentage is usually negotiable.
Getting the Loan
If you have any questions regarding USDA loans, or would like to qualify for one, please contact one of our Licensed Mortgage Loan Originators by clicking here.