In 1991 USDA (The United States Department of Agriculture) started offering loans for the development of rural and suburban areas to home buyers with low-to-average income for their area. They offer financing with no down payment, reduced mortgage insurance, and below-market mortgage rates.
USDA mortgage program is helping homebuyers who never thought they could do anything but rent due to their low income and absolutely no savings.
Why does USDA offer these programs?
USDA mortgage are offered for improving the economy of rural America.
Who benefits from USDA programs?
USDA loans are mainly for borrowers who aren't wealthy and can’t get a traditional mortgage.
The Section 502 Guaranteed Loan Program reduces the risk for approved lenders by providing a 90% loan note guarantee, who further provide a 100% financing to homebuyers. This USDA program provides low and moderate income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may purchase, build, rehabilitate, improve or relocate a dwelling in an eligible rural area with 100% financing.
Under USDA guaranteed loan program the homebuyer must meet the following criteria:
The Section 502 Direct Loan Program assists low and very-low income applicants obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted family income.
Under USDA direct loan program the homebuyer must meet the following criteria:
Under USDA direct loan program the property must also meet some requirements, that are as follows:
Note 1: USDA official website last assessed on 22nd Apr 2021 for updated content and terms.
Note 2: Guaranteed and Direct are the two programs for home buyers. Guaranteed is materialized with the help of a lender but still has to be approved by the USDA.
Apart from home buyers eligibility, the property should also be in a location eligible for USDA loan. Metropolitan areas are excluded from eligible areas, nearby areas may qualify for the USDA program. If you are willing to go for USDA mortgage make sure to check the USDA eligibility of the property. One more thing as per USDA guidelines is that the property itself cannot be an income producing if you want to avail this program.
The best way to get started is by doing a home search from the list of properties which are listed for sale and are also in an eligible zone.
Multi-unit houses will not qualify for a USDA loan. Moreover USDA mortgage cannot be availed for vacation homes, investment property or a property having a working farm.
With a USDA loan, you don't have to make a down payment. This is one of only two major loan programs (other being VA loan) that allow zero-down financing. Some of other benefits are listed below:
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Talk to a USDA mortgage expert and see if you can qualify for a USDA loan.