Buying a home or getting a mortgage loan may feel like it’s becoming increasingly harder as the years pass. Because of this, if you’re branching out, you may want to consider USDA home loans.
USDA loans come with their own sets of qualifications and are usually geared for rural or low-income buyers. However, there are a number of benefits to taking out this type of loan. Let’s take a deeper dive and explore 5 of those benefits!
Purpose
The purpose of USDA home loans is literally to assist low-to-moderate income buyers in rural areas in purchasing a home.
When you don’t have a lot of money, sometimes it can seem like actually owning a home is a pipe dream. USDA home loans help give people who aren’t wealthy a chance at affording a home.
This can help promote prosperity, according to the US Department of Agriculture. USDA loans exist to promote happiness, harmony, and improve the quality of life.
Types
There are two types of USDA loans: direct and guaranteed. Direct loans have more requirements to use. Your property has to qualify as “modest in size” for your area, and it cannot have a market value that exceeds your loan limit. There are also limitations put on your home itself.
Direct loans are aimed at low-income families, so the requirements can be strict.
Guaranteed loans are similar, but they open a few more doors and aren’t quite as strict.
Qualifications
Direct and guaranteed loans have different sets of qualifications. To qualify for a direct loan, you must not own a home. You also must not be able to obtain a loan elsewhere, and you have to legally be able to handle a loan.
If you’ve been suspended from participating in federal programs, you will not be able to apply.
Guaranteed home loans have income-eligibility requirements. To get a guaranteed loan, you must also be a US citizen or otherwise qualified, and you need to be able to pay your credit obligations in a decent amount of time.
Down-payments
The great thing about USDA home loans is that they don’t require a down payment.
If you’re a qualified borrower and have been approved for the loan, there’s no down-payment required. This can wind up saving you thousands in home-buying costs and upfront expenses.
Insurance
USDA loans do not have private mortgage insurance, also known as PMI. Instead, your USDA loan will have a premium for your mortgage insurance wrapped up in the cost.
Typically, this is about 2% of your entire loan cost. However, it’s also not a separate payment, and it’s included in the cost of your loan.
USDA home loans: the right choice
USDA loans are a great choice for people looking to purchase in rural areas. Additionally, if you’re a low-to-moderate income homebuyer, it’s very likely that you qualify for one of these loans.
A USDA loan can help you save thousands of dollars in home-buying expenses because they don’t require down payments. However, you do need to make sure that you qualify.
If you have questions regarding home loans and the home buying process, please don’t hesitate to contact us!