USDA loans are from U.S. Department of Agriculture for rural housing development. This 100% financing loan is for below-average home buyers. The interest rate and mortgage insurance premium are less compared to the current market. People from rural and suburban areas are eligible for the loan. One of the main advantages of this loan is there is no down money.
Though it is for the rural and suburban people but geographically 97% of the country is an ineligible territory. This isn’t an old loan program known to all. But it has been updated to appeal to suburban home buyers across the country. One can get 100% of home price loan without no down money and at a below average interest rate.
The closing cost is normal and there is no prepayment penalty. The repayment schedule is also standard. Both first-time and repeat home buyers are eligible for the loan at a fixed rate.
Advantages of USDA Home Loan over Traditional Loans
- You can get a loan of 100% of the property value without down payment.
- Sometimes the seller may contribute the closing costs.
- On fixed 30-year, loan grants and gifts are permitted in some county.
- No need to be a first time home buyer.
- No need post-closing reserve.
You must have to be a U.S. citizen or permanent resident of the country. The property to buy should be located in designated suburban and rural areas. You should have a dependable income source for at least 2 years. The monthly payment of this loan must not exceed 29% of your monthly income. Your credit history also should be acceptable. You also have to agree on the property as your primary residence. The lenders normally want borrower with 620 credit score or more without foreclosures and bankruptcies.
If the current dwelling place of applicants is not decent, safe or sanitary housing than he will get the highest priority. Applicants also should be unable to get a loan from other traditional loans. They should have the legal capacity to incur loan obligation. The people who are suspended from participation in federal programs are not eligible for USDA Home Loan.
How may USDA Home Loan be used?
You can buy a permanent residential property as your primary dwelling place. You can also do the repairs and rehabilitation. Essential furniture, household equipment, new design, and install any permanent equipment all are acceptable. All other additional costs with these sectors are also acceptable.
The home should be 1800 square feet or less depending on your area and current market rate. The house should be without a swimming pool. The property should be designed for dwelling place not for income producing activities.
USDA Home Loan Process
There are few certain steps to get the USDA Home Loan.
- Confirm your eligibility by reviewing your income source, credit history, debts and assets. You can take help from any consultant about this.
- Choose the home to buy.
- After that make an offer that goes with USDA loan. Here you can prepare your loan in which the closing cost may be contributed by the seller and without down payment.
- Then make a set up to inspect your home. They will examine your income, credit history, and other required papers to ensure your safe and decent dwelling place.
- At scheduled closing time you have to sign a paper and take the ownership of your property.
United States Department of Agriculture (USDA) made this loan program to ensure better and safe home for everyone in the rural and suburban area. This loan is also known by 502 Home Loan. If you need a home and you are eligible for this loan, then don’t hesitate to apply.