Who Qualifies for a USDA Loan?
USDA loans can be a valuable option for those who meet the eligibility criteria and are looking to purchase a home in a qualifying rural or suburban area. It’s important to work with an approved lender who will carefully review the program’s guidelines to ensure you meet all the requirements.
The USDA loan, officially known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan program offered by the US Department of Agriculture. It helps people in rural and suburban areas become homeowners. Here are some key features of USDA loans:
Income Limits
Borrowers must have a household income within the limits established for their location and family size.
Types of Loans
Guaranteed loans are the most common type of USDA loans. They are guaranteed by the USDA and issued by approved lenders, such as banks and mortgage companies. This guarantee reduces the risk for lenders, making it easier for borrowers to qualify.
Direct loans are issued directly by the USDA to low-income borrowers who may not be able to obtain a loan from other sources. Direct loans are intended for households with very low or low incomes.
Down Payment
One of the significant advantages of USDA loans is that they typically require little to no down payment. This can be especially beneficial for individuals or families who may not have substantial savings for a down payment.
Mortgage Insurance
USDA loans have both upfront and annual mortgage insurance fees. While the upfront fee can be financed into the loan amount, the annual fee is paid as part of the monthly mortgage payment.
Interest Rates
Interest rates for USDA loans are set by the individual approved lenders. While they can vary, USDA loans often offer competitive interest rates.
Property Requirements
The property being financed with a USDA loan must meet certain requirements, including meeting certain quality and safety standards, and being in an eligible rural or suburban area. The USDA provides an online map that allows potential borrowers to check whether a specific property is in an eligible area.
Repayment Terms
USDA loans typically have fixed-rate terms, meaning that the interest rate remains the same throughout the life of the loan. This can provide borrowers with stability and predictability in their monthly mortgage payments.
