5 Essential Facts About USDA Home Loans

usda home loans

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 homebuying 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!

How to Determine Your Home Loan Eligibility

home loan eligibility

Are you looking to take that next step in your life? Have you finished browsing the net looking for that perfect place to call home?

Are you ready to become a homeowner?

Before you can actively start looking to purchase a property, the first sensible thing to do would be to check out your home loan eligibility.

Why?

Because knowing how much you can borrow not only helps you understand your own financial situation but also it stops you from getting your heart set on a place, only to find it out of your budget.

Let’s take a look at the best ways to check on your maximum home loan potential.

Calculate your Home Loan Eligibility Early To Set Your Search In the Right Area

When it comes to a home loan, the math is actually quite simple. You look at what you have coming in – your income – and you deduct your outgoings each month – your expenditure. The rest is just a matter of seeing how much you can realistically afford to pay back each month.

There are plenty of home loan calculators out there that can help you get a ballpark figure.

The main criteria that get looked at when applying for a home loan are:

Age – As harsh as it sounds, age plays a role in your home loan calculations.

Employment Status – if you are in a stable full-time job, then that is a big check in the plus column because a regular income shows the bank that you are in good standing to make your payments every month. The amount you are earning will also directly influence the amount you can borrow.

Credit Rating / Credit Card History –  If you have been living a debt free life, or at least maintaining your credit card by paying off your purchases in a simple large lump sum each month, then you score maximum points. The better managed your credit card history, the better image you produce for the banks looking to lend you money.

Choosing the Right Home Loan for You

There is more to finding a home loan than just understanding your home loan eligibility. Loan types and duration are also deciding factors.

The core loan types you should be looking at:

Fixed Interest –  The simplest loan. All you need to do is set your interest rate for 15-30 years and simply let your payments run. A great loan for those that are buying with the intention of staying put, and want to know exactly how much they will be paying for the foreseeable future.

Adjustable Rate Mortgages – If your credit rating is working against you, then you can counter balance this to some degree by taking a flexible interest rate loan. Here, the rate is set for a shorter period of time and will then be adjusted.

Federal Housing Administration Loan – For many people, being able to save the average 20% needed for a downpayment on a home, can be tough. With FHA home loans, you can put down as little as 3.5% on a down payment and move on with a fixed interest rate.

The only caveat with this is that you need to take out mortgage insurance, which you can spread over the life of the loan. This totals to approximately 1% of the full loan value.

Buying a Home is the Biggest Decision You Will Make

Making the decision to buy a home is one of the biggest things you will do in your life. To do so without due care and attention can be problematic.

By first understanding your home loan eligibility you can get yourself started on the next phase of your life with a clean conscience, knowing that you are not getting yourself into financial trouble.

If you need help with arranging your home loan or are looking for a quote, get in touch with us today. We are here to help.

Four Quick Tips To Buying Your Next Colorado Springs Home

Buying a home doesn’t have to be stressful! Here are four quick tips to make the process stress free!

1. Find a reputable, experienced real estate pro. Today’s Realtor will not only help you find a home, but also guide you correctly through the whole buying process.

2. Understand the process. Research as much as possible and know what to expect from beginning to end.

3. Know how much you can afford – Eliminate surprises by establishing a budget.

4. Don’t wait to buy real estate…. buy real estate and wait. Real estate is a long-term investment so take your time and find the right home for you and your family!

More information

How to Qualify for a USDA Loan

If you are planning to buy a home in a rural area, ask your real estate professional whether or not the area qualifies for USDA Home Loans.  For properties that qualify, you may be able to finance 100 percent of the purchase price of the home on a 30 year fixed interest loan.
Because the USDA loan program does not require a down payment, you can hold onto the money you would have put down on another property outside the USDA loan area. Or, you can use the down payment funds to repair or improve the property.  It’s your call under the terms of a USDA home loan.

How does it work?

USDA home loans are originated by the federal government, but serviced through direct lenders.  The repayment of the loan is guaranteed by the United States Department of Agriculture.  This means you can use any traditional mortgage lender, but the loan must meet the USDA loan guidelines in effect at the time of the mortgage origination.

The application process for a USDA loan is essentially the same as any other loan, but the lender must ensure that you and the property both qualify for the USDA program.  Eligibility of the property itself is determined not by the potential buyer, but by the location of the property.

Will you qualify?

Your ability to get a USDA loan is determined by your financial history. If you are a United States citizen and have a solid credit history (the usual qualifying score is between 620 and 640) and meet the usual income requirements, you can be qualified for USDA loan (presuming the home is located in a rural area covered by USDA loans). A steady job with a reasonable income is generally required for a loan approval.

You cannot qualify for a USDA loan if you have had a bankruptcy in the previous three years.  You won’t need perfect credit, to get financing through USDA, but the more you pay attention to your financial record, the more likely you are to get a USDA loan approved.

If you are first time home buyer or if you simply want to purchase a property that qualifies for a USDA home loan by virtue of its rural location, now is the perfect time to talk to your real estate professional about starting the qualifying process.  USDA home loans offer you the flexibility, stability and economy you need to make your plans for a new home a reality.

FHA/VA What You Need to Know about Financing Rural Homes

Rural property guidelines that must be followed when financing with an FHA or VA mortgage home loan.

Rural Home Guidelines 1

Courtesy of Mortgage Currentcy

Rural Home Guidelines 2

Courtesy of Mortgage Currentcy

Rural, FHA and VA Home Loan Guidelines