USDA Home Loans
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What is a USDA Loan?
USDA loans make it easier for low-to-moderate-income home buyers to purchase a home in a USDA-eligible area. Backed by the U.S. Department of Agriculture, these loans offer 100% financing and low interest rates. The main benefit of a USDA loan is that no down payment is required, which helps those who would not normally have access to homeownership. This decreased risk for lenders is balanced by the USDA's Rural Development Guaranteed Housing Loan program, which provides a safety net for lenders in case of a borrower default.
Qualifications for a USDA Loan
Property Eligibility
USDA–eligible properties don‘t always need to be in farming areas. The USDA classifies rural areas in broader terms—in fact, 97% of US land qualifies for a USDA loan! Even if you don‘t think your property qualifies, these types of loans are worth investigating.
Eligibility Requirements
To qualify for a USDA loan, buyers must:
- Purchase a home in a USDA-eligible area
- Have a preferred minimum credit score of at least 640
- Meet the income limits for the area
- Occupy the dwelling as a primary residence
- Be a U.S. citizen, U.S. non-citizen national, or qualified alien.
Income Limits
To qualify, home buyers will need to meet income requirements based on where the property is. USDA loans are aimed toward moderate income earners. Borrowers can not earn more than 115% of the median income for the home’s geographic location.USDA Guarantee Fee
USDA home loans are an attractive option for eligible borrowers, particularly first–time home buyers. While there is no requirement to make a down payment, there is a 1% guarantee fee which can be rolled into closing costs. This fee is relatively low compared to other loan programs such as FHA. In addition, borrowers are responsible for a 0.35% annual mortgage insurance fee, which is paid in monthly installments.
Overall, the fees associated with a USDA loan are much lower than other loan programs, making them an attractive option for those who qualify. This makes them an especially appealing choice for first–time home buyers.
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USDA Mortgage Rates
USDA loans offer some of the most competitive interest rates available and are backed by the U.S. government. This gives lenders peace of mind, meaning they can offer lower rates to home buyers. To get the best rate, it's important to have a good credit score and to keep debt levels low. If you have questions about your credit score, talking to your lender is a great place to start.
Apply for a USDA Loan
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