Quick Overview Of USDA Loans: Options, Eligibility And More!
If you hope to buy a home outside city limits or don’t have the resources to pay the down payment and afford a traditional loan, USDA loan might be a good choice. Offered by U.S. Department of Agriculture, this kind of loan doesn’t require any down payment and can be used for buying homes located in suburban and rural areas. Here’s what you need to know before applying.
Who is eligible for a USDA loan?
There are websites like USDAloan that can put you across with a loan specialist, who can help in understand the eligibility criteria. Please note such criteria can be related to location and region, and therefore, it is hard to cover everything in a post. However, in broad terms, the following aspects must be met by an applicant.
- The applicant needs to be a US citizen or should have permanent residency.
- The applicant needs to have a stable and dependable source of income, at least 24 months.
- The applicant should be able to make a monthly payment, which includes everything from the interest and principal to taxes, and the same should not exceed 29% of their monthly income.
- If the applicant has other loans, the total payments towards debt shouldn’t be more than 41% of the monthly income.
- The credit history of the applicant should be acceptable. In general, a credit score of 640 is considered to be decent.
Types of USDA loans
The U.S. Department of Agriculture has three different options –
- Loan guarantee. Such loans allow homeowners to buy a home in the rural area, and to enable the same, USDA guarantees the mortgage, which is offered by a local lender. This is similar to VA loans in many ways. The applicant can get an effectively low rate of interest, and there is no need to pay any down payment. However, the mortgage insurance must be paid, although the rate is much lower at just .35%.
- Direct loan. USDA does have the option of offering a direct loan, especially to applicants belonging to extreme low-income groups. There are also subsidies offered, and the income limit can vary by region. In some cases, the interest rate can be even 1%.
- Home improvement loan. The third option is a home improvement loan, which doesn’t exceed $27,500, and is offered for homeowners, so that they can upgrade and repair their homes. In some cases, the loan may also include an extra amount of grant.
How to apply?
You need to get in touch with a USDA loan specialist, and if you supply tax returns, employment details and statements from the bank, you can get preapproved. Please note that the property you choose should be located in an area that’s recognized by USDA as rural. Also, the house needs to be your primary residence. To be more precise, you cannot apply for a USDA home loan and give the property on rent to get commercial gain.
Check online now for more details.