USDA Home Loans

Buying a home is the dream of millions of Americans. But often, the inability to save enough money for a down payment or qualifying for a mortgage stops many potential buyers from even applying for a mortgage. Fortunately, for prospective homebuyers in rural areas, the United States Department of Agriculture (USDA) offers options to help make the dream of homeownership come true. As part of the Rural Development program, the USDA provides a full range of loan options for low and medium-income buyers. Rural home buyers should inquire with their local loan officer to see if they offer USDA Rural Development loans. Online lenders provide a speedy and convenient alternative. Loan applicants can determine how much they can afford by using mortgage calculators.

What are USDA Home Loans?

USDA home loans are mortgages for people living in rural areas and may not be able to obtain a loan from a traditional lender. In the past few years, the USDA has provided loans to over 100,000 homeowners.

There are three types of USDA loans. First, they offer loan guarantees issued by a participating local lender. It allows borrowers to get low or no money down mortgages. Second, direct loans are for low income applicants and, with subsidies, provide lower interest rates. The third loan type is a home improvement loan for upgrades or home improvements. USDA homes help low to moderate income families realize their dream to be homeowners.

USDA Loans

USDA Rural Development Programs

The Rural Development (RD) program is a United States Department of Agriculture (USDA) initiative committed to improving rural America’s quality of life and economy. Their primary mission is to provide loans and grants to businesses to boost economic development. The RD program also helps provide safe and affordable housing to homeowners. Other RD programs support community facilities construction, energy programs, water, environmental programs and multi-family housing programs. In addition to loans, the RD program issues grants to organizations involved with self-help construction projects. These grants are issued to non-profit organizations to help low-income communities build their own homes.

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USDA Benefits

The primary benefit of a USDA loan is that the homebuyer can put little or even no money down to secure their home loan, however they will have the requirement of mortgage insurance. Additionally, low-income borrowers are eligible for subsidies to lower interest rates If the property needs improvements, loans and grants can also be used to make repairs and improvements to existing homes.

USDA Home Loan Requirements

To be eligible for a USDA home loan, certain requirements must be met:

  • Homeowners must have had their mortgage denied by a traditional lender
  • Applicants must be U.S. citizens
  • Applicants must have a dependable income
  • Applicants must have a reasonable credit score
  • For direct loans from the USDA, applicants must meet income restrictions

Direct loans are typically given for small homes of less than 2,000 square feet. Other requirements include meeting debt and spending limits. For instance, debt to income ratios (how much monthly debt compared to income) must not exceed 41% and housing payments must not exceed 29% of monthly expenses.

Homebuyers employed full-time must demonstrate at least one year of solid employment while those self-employed must show two years. Credit scores are also important, requiring an applicant’s score to be 640 or above. The dwelling is also considered in the application process. Homes must be on a reasonable-sized lot consistent with the surrounding neighborhood. There is no set purchase price or mortgage limit.

How to Apply for a USDA Home Loan

Capital Bank Home Loans offers USDA loans. Get pre-approved and your personal mortgage banker will take you through the housing program’s different programs and eligibility requirements. The Capital Bank application process can take less than 30 days in many cases. Get a rate quote to compare with other online vendors.

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