Usda Home Loans

USDA Home Loans

If you are more comfortable living surrounded by pastures more than the urban jungle, owning a home is quite within reach more than you would know. This is thanks to a U.S. Department of Agriculture rural mortgage program. Also referred to as the Rural Development Guaranteed Housing Loan Program has to be one of the least known mortgage assistance programs. Nonetheless, it has the potential to help you.

Established as part of the efforts to spur growth and development in rural America while also improving the quality of life under the Rural Development program, the USDA loans have helped numerous people. For instance, in 2017, these loans helped more than 127,000 families in their quest to buy a home or upgrade their homes.

The unique things about the USDA home loans are their favorable terms. For starters, the loans do not require any down payment for eligible applicants looking to purchase and or upgrade rural and suburban homes. Moreover, they also attract low-interest rates. Importantly, it is surprisingly accessible.

But what makes it the best mortgage loans option for you, given that you have plenty of options to choose from. Below is an overview of how the USDA mortgage loan work and who qualifies for the assistance loans:

How USDA Loan Program Works

There are 3 distinct USDA home loan programs:

Direct Loans:These are the loans that are issued directly by the USDA. They are designed and meant for the low and very low-income earners applicants. The loans can attract as little as 1% interest rate when all the subsidies have been applied. However, it is important to note that the income thresholds do vary from region to region.

Loans Guarantee: This loan program works very similar to the VA-backed and FHA loans, whereby the USDA guarantees an applicant loan that is issued by a local participating lender. It gives the applicants access to low mortgage interest rates and usually, applicants do not have to have a down payment. However, when you put no down payment or a little sum, you do have to pay a mortgage insurance premium for your loan.

Home Improvement Grants And Loans: This part of the program are financial awards that allow homeowners to carry out improvements to their homes. The grants and loans can be combined as a package to provide up to $27,500 in assistance.

How To Qualify For A USDA Mortgage Guarantee

The income threshold below which you are eligible for home loan guarantees varies from location to location. They are also dependent on the household size. For a better understanding of the income limit for the county you live in, explore this USDA table and map.

You should also note that the USDA guaranteed home loans are only eligible to owner-occupied primary residences. Applicants must also have U.S. citizenship (or permanent residency)

A Monthly Payment

To be eligible for the loans you need to be able to make a monthly payment that includes the interest, principal, taxes, and insurance which is 29% or less of your total monthly income. Furthermore, the applicant cannot have other monthly debt payments exceeding 41% of your income. However, for individuals with a credit score higher than 680, the USDA can consider higher debt ratios.

Dependable Income, Usually For At Least 24 Months

An applicant also needs to have an acceptable credit history with none of their accounts converted to collection in the last 12 months. However, applicants can still be eligible if they can prove that their credit history was affected by circumstance beyond their control or temporary circumstances such as medical emergencies.

Applicants who have a credit score of 640 or higher usually receive a more straightforward application process. However, if your credit score is below that, one must meet more stringent conditions before qualifying. However, you may also qualify even when you have a nontraditional credit history. For instance, when you have a limited credit history or no credit history at all, you can use utility bills and rental payment history to qualify.

How USDA-Issued Mortgage Loans Work

The USDA typically issues mortgages to the applicants who seem to have the greatest need, thereby helping households purchase their homes. As such, they focus on households that:

Is deemed to have no sanitary, decent, and safe housing
Is unable to secure a loan via the traditional mortgage sources
Has an income level that is at or below the low-income limit for the location they reside in

To this end, the USDA typically provides loans to households whose houses are 2,000 square feet or less and whose homes have a market value of less of than the lower limit in their area. Again, this will vary depending on your location.

Typically home loans can be as low as $100,000 in rural America. However, they can be as high as $500,000 in locations such as California and Hawaii which have a pricey real estate market.

Applicants who have a credit score of 640 or higher usually receive a more straightforward application process. However, if your credit score is below that, one must meet more stringent conditions before qualifying. However, you may also qualify even when you have a nontraditional credit history. For instance, when you have a limited credit history or no credit history at all, you can use utility bills and rental payment history to qualify.

Eligible Home Locations

Rural areas are always eligible for loans under this program. There are some pockets of opportunity for suburban locations. However, metropolitan areas are usually excluded from loans program.

Next Steps

If you want to apply for a USDA-backed mortgage loan, talk to your local participating lender. However, if you are looking for a USDA direct home improvement or home loan or grant, you need to contact your state USDA office.

While many assume that a USDA loan program is targeted at ranchers and farmers, the reality is that occupation has no bearing on your qualification. Only your location and income have a bearing on your eligibility.

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Prodigy Lending is a DBA of AmCap Mortgage, Ltd. (NMLS ID# 129122 – www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/129122), an Equal Housing Lender.
Managing RMLO: Jason Turner (NMLS #286357)