First-time homebuyers have to tackle a lot of challenges. Securing a real estate agent to find the dream house, a bank to finance the property, relocating, and settling in—it can be quite stressful. Did you know the USDA rural development loans can allow you to finance 100% of the property price? Read on to learn more about USDA loans and why they can be the best choice for your first home purchase.
What is a USDA Loan?
A USDA loan is an affordable mortgage option that makes home ownership feasible for low-income individuals who reside in designated rural regions. It is a part of the USDA Rural Development Guaranteed Housing Loan Program, which comes under the U.S Department of Agriculture. Qualified buyers can buy a house with zero down payment.
Types of USDA Loans
The three home loan programs under the USDA are:
- Direct Loans: With interest rates as low as 1%, these loans are offered to eligible low-income borrowers.
- Loan Guarantees: These loans have low interest rates and low down payments—as little as 0%—and are issued by participating lenders.
- Home Improvement Loans: Homeowners who meet the requirements can use the loan to make repairs or upgrades to their homes.
What Are the Eligibility Criteria for a USDA Loan?
The USDA loan has specific qualifications for both the homebuyer and the property. In order to be eligible for the USDA loan, you must fulfill these specific requirements.
- You must be a citizen or permanent resident of the United States.
- You should have a track record of steady income.
- A credit score of at least 640 is required.
- The house must be located in a USDA-designated rural region.
Why Are USDA Loans a Good Option for First-Time Homebuyers?
The USDA loan offers many benefits to first-time homeowners. These advantages include:
- Zero Down Payment: One of the main benefits for first-time homeowners who utilize a USDA loan is the ability to obtain financing with zero down payment. The USDA loan is one of the few mortgages in the United States that does not mandate a down payment.
- Simple Qualifying Criteria: The USDA insures a portion of every loan against default, enabling lenders to offer flexible eligibility conditions as well as reasonable rates and terms.
- Low Mortgage Insurance: The upfront guarantee premium is only 1% of the loan amount, and the yearly guarantee premium is just 0.35%.
Who Should Apply for a USDA Loan?
If you meet the following criteria, you should get a USDA loan:
- Your family’s income is equal to or less than the USDA’s median income guidelines in your area.
- You’re happy to limit your house search to rural areas with USDA approval.
- You don’t have enough cash for a down payment.
- You want to buy a prefabricated house to install on a remote lot.
- You wish to convert your existing USDA loan into a new USDA loan.
If you’re looking for a mortgage or searching for other loan options, we can help you find the right financing for your new home. Reach out to us today!