For the uninitiated, a USDA home loan is a mortgage offered by the U.S Department of Agriculture that doesn’t require a down payment. This means the applicant gets 100% financing for the property. There’s a catch though – Such loans are only available for properties that are located in rural and suburban regions recognized by USDA. This is same as USDA Rural Development Loan, so do not get confused.
USDA also offers direct loans under this program, but that’s only for people belonging to extremely low-income categories. There’s also the third choice of a home improvement loan, which may include a grant and usually has a much lower limit. Websites like www.usdaloan.com offer considerable information on these loans, but here’s a quick take on some of the aspects that need attention.
How does it work?
You can get in touch with a USDA loan specialist, and they can help you understand more about this kind of financing. Most lenders can approve USDA home loans, which is a good thing. Next, you should consider getting preapproved, for which you must submit your employment details, credit report and income information. If you have those things in place, getting pre-approved isn’t much of a hassle. To make an offer, you need to next find a home that is located in regions approved by USDA. All details will be added to the loan file by the lender if papers are in place, and the same will be submitted to USDA for approval. Within days, the house can be hours.
Things to know
- First things first, you can use the USDA loan to buy your primary residence. Yes, you read that right. You cannot use this financing option and let out the property on rent. This has to be where you stay.
- You credit score does matter. A score of 640 is considered to be enough. USDA and the participating local lender will also want to the total payment towards debt per month. Ideally, your payment towards debts shouldn’t be more than 41% of the monthly income. The monthly amount for the mortgage, which includes taxes, insurance, and interest, must not exceed 29% of your monthly income.
- With regards to eligibility, you should note that it is determined on various factors, and that can vary by region, which is why it is impossible to cover all details in a post. However, the location of the home, credit score and income of the applicant are aspects that matter the most.
While USDA requires no down payment, do your homework well and consider your financial goals before applying. Not many people know about it, and if you have the papers right, you can always get approved in no time. For those who have been trying for a conventional loan with little success, USDA loans are a great choice, and you can even opt for a grant to upgrade your home later. Initial research can go a long way in achieving the American dream of homeownership!