While you may be aware that some mortgages are insured against default by government agencies (Federal Housing Authority and Veterans Administration), there is a third type of mortgage that you may not be aware of.
For those looking for a home in specifically designated rural areas of the U.S., a mortgage through the U.S. Dept. of Agriculture might be the right fit.
What is a USDA loan?
The first aspect of USDA mortgages that differentiates them from other types of loans is that they are for those who are looking to buy in rural or suburban communities. The program, as stated on the USDA website, provides “low- and moderate-income households the opportunity to own adequate modest, decent safe and sanitary dwellings as their primary residence.” The program is for the purchase of existing homes or the construction of a new home.
USDA mortgages are especially attractive because no down payment is required and there is no minimum credit score to be eligible. However, lenders that originate these types of loans may have their own credit score requirements. The USDA states that borrowers “must demonstrate a willingness and ability to repay debts.” Regarding income, if borrowers are not self-employed, one year of income history is required. If borrowers are self-employed, two years of income history are required.
VA and FHA loan programs don’t loan directly to borrowers. Instead, lenders originate such loans. USDA loans differ in that there is a direct loan option. The direct loan option is for “low- or very low-income families who are in search for “decent, safe and sanitary dwellings.” Borrowers for the direct loan option must also show documentation indicating their income is below local limits. And the homes borrowers are buying through this type of direct loan must be 2,000 square feet or less.
The guaranteed loan through the USDA is obtained through a USDA-approved lender. These loans are meant for low- and middle-income families. The process and requirements are much like other types of loans. However, a significant difference to other loans is that USDA guaranteed loans are for 30 years at a fixed interest rate. There are no shorter or longer terms available.
The USDA’s mortgage program is meant to make homeownership a reality for those who are in low- to moderate-income households. As stated on its website, the USDA states that “providing homeownership opportunities promotes prosperity, which in turn creates thriving communities and improves the quality of life in rural areas.”
Better Lending is a USDA-approved lender. If you are looking to buy a home in a rural or suburban community and would like to learn more about this loan option, call 888-400-1373 or email [email protected].
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