Buying a home is a long-cherished dream of many. If you cannot afford a traditional mortgage or a home somewhere within the city limits, consider rural areas, and you might be eligible for a USDA Loan. The US Department of Agriculture (USDA) offers loans for low-income Americans, so that they can afford a home, without any down payment and with a low interest. There’s a catch though – You cannot get a loan for investment or rental income purposes. These are fixed-rate mortgages for usually 30 years, and the USDA has partnered with local lenders to offer easy lending options.
Here’s what you need to know to build an USDA home loan strategy.
What are the options?
There are three major kinds of USDA Loans that one can avail. The first one is a guaranteed USDA Loan, where USDA works with local lenders to offer mortgage option. The lender will clear the loan, because USDA offers a guarantee for a part of the mortgage. This kind of loan is best suited for borrowers who are from moderate-income families. The second choice is a direct USDA loan, which is offered by USDA directly, usually for people with low income, who cannot otherwise opt for any of the conventional financial lending choices. There’s also the third choice of home improvement loans, which is offered by USDA, either with or without grant, for homeowners, so that they can update and renovate their homes.
Qualifying for a loan
Your income is usually the first criterion for being eligible for a USDA Loan. Ideally, payments for debts, bills and mortgage shouldn’t exceed 41% of the monthly income. The credit score also matters, and a score of 640 is considered to be acceptable. USDA has mentioned different income limits and maximums for different areas, which you can check. It is possible to get a USDA Loan without any credit score or a bad score too. Other requirements are pretty basic. For example, you need to be a US citizen, your mortgage payment including all things shouldn’t exceed 29% or your monthly income, and you must have a dependable source of income, at least for two years.
If you want to know more on USDA Loans, there are a bunch of websites that can help. Enquire everything, and if possible, get preapproved. For someone who doesn’t have a lot for a city home, USDA Loan programs are extremely useful.