USDA Home Loans
What is a USDA Home Loan?
It is a home loan backed by the United States Department of Agriculture with the intention of providing affordable housing, that in turn improves “rural” development. The USDA Guaranteed Home Loan program provides a potential buyer the ability to secure a loan in order to purchase and own a home when they might otherwise not be able to afford it. This is due in large part because of three specific advantages or benefits included in USDA home loans: (1) no down payment, (2) low fixed interest rates, and (3) no requirement for mortgage insurance.
The intention of a USDA loan is to offer a potential buyer of low-to-moderate income, the ability and opportunity to own a clean, decent, modest home in an environment that is both safe an appealing. The loan covers 100% of the home loan so the purchase can be made without a down payment. Loans are fully amortized for 30 years with a fixed interest rate, unlike ARM loans, that is in most cases lower than other types of home loans.
A potential applicant must meet several USDA loan requirements. These may vary by each State or location within a State, so it is best to check. Basically, the buyer must be a citizen of the United States or of permanent legal residence status. He/she must personally occupy the purchased home as his/her primary residence. He/she must have a reasonable credit record or a middle FICO score of 640+ and must be able to make a reasonable monthly payment in a timely manner. He/She cannot have a poor record in a previous federal program. In addition, the buyer must be purchasing a program-approved property, located within the USDA eligible area map, which can include a new or previously built home.
It is also important to note that USDA home loans can be used to cover a wide range of additional expenses related to the purchase of a primary dwelling. This can include the preparation of the property for building, such as grading, foundation landscaping, seeding, and installation of fences and driveways. Fees associated with moving into the home as well as utility hookups can also be included. Furthermore, it can also include major home repairs, additions, and/or improvements such as the purchase of carpeting or flooring, as well as the purchase of major home appliances including buying and installing equipment for energy efficiency.
USDA rural development is a program in which the term “rural” is used loosely. A rural area is defined as (a) an open country that is not part of or associated with an urban area, or (b) any town, village, city, or place that is not part of or associated with an urban area and (1) is rural in character with a population of less than 10,000 or (2) is not contained within a Metropolitan Statistical Area or MSA and has a serious lack of mortgage credit with a population between 10,000 and 20,000.
It does not necessarily mean that the property purchased with USDA home loans must be outside the limits of any city or town. In addition to an actual rural area, USDA loans can be made for purchases in small towns, and many suburbs or exurbs. In fact, a big part of the United States is considered “rural,” so it is always important to contact a USDA Loan Specialist to check on approved properties.
- Is open to all potential new and previous buyers;
- Offers a fully amortized 30-year loans at reasonable fixed rates;
- Requires no money down;
- Makes loan approval easier;
- Is affordable to buyers not otherwise eligible;
- Offers reasonable monthly payments.
For more information, contact USDA Guaranteed Home Loans or USDA Home Loan Specialists at (832) 356-5605.