You don’t have to live in an area where your closest neighbor is miles away in order to qualify for a USDA home loan. Most of the country is already eligible, including suburban area’s and even some college towns.
In order to qualify for a USDA home loan, you will need a certain level of income, a credit score and a down payment. In some cases you may need all three. If you don’t like the metropolitan scene and would rather live in a more rural environment then a USDA loan may be right for you. USDA home loans were created to help advance home owner ship in the rural areas of the country, and they offer competitive rates and some important benefits. USDA also has the most simplest of rules for eligibility than any other loan program. USDA loans are perfect for those low income families who have “fair” credit and little or no money to put down.
Unlike other conventional loans, you don’t need a perfect credit score in order to qualify for a USDA loan. In most cases, you can qualify for a USDA loan even with a low down payment and in some cases no down payment at all. You also don’t need to be a first time home buyer in order to utilize the USDA loan program. Anyone can qualify.
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USDA Home Loans: An Overview
Usually, USDA home loans aren’t offered by your traditional banks, you will most likely need to go through a smaller lender who is USDA qualified. Since the beginning of USDA loans, it has been the number one home loan program for rural home ownership since 1991. While USDA home loans were created for low income households, there is a much broader range of requirements to help you qualify, and there’s actually two different kinds of USDA home loans and each have their own requirements.
Direct Loans: Direct USDA loans come from the U.S. Department of Agriculture directly, and are intended for those low income families whose income is less than 80% of the local median.
Direct loans have slightly more requirements when it comes to the terms of their usage. In order to qualify for a direct loan the property you are interested in must be modest in size for that specific area and the market value cannot exceed the loan limits. Since these loans are more for the low income families they require a slight stricter set of rules. Loan amounts are limited depending on the borrower’s income and ability to repay the loan. While the borrowing requirements are more strict, USDA direct loans do offer some flexibility in how funds are used, not only can you use the loan to purchase rural properties, but you can also use the funds to build a new house, or repair and renovate an existing one.
Guaranteed Loans: Guaranteed loans are loans that are offered through the U.S. Department of Agriculture and are granted by a third party, such as a bank. These loans are for families with a broader income range and with an income that can be up to 115% of the local median.
Guaranteed Loans offered by the USDA are similar to how direct loans work, but with a few expections. Guaranteed loans have a much broader range of eligible borrowers, and you can use these loans for refinancing or upgrading the home. Funds from a guaranteed loan can be used for; building a new home, buying land, repairs or upgrades to an existing property, refinancing, design features and upgrades- such as, making a home handicapped accessible, connection fees for utility installments, and upgrades that improve energy quality- such as, solar panels. Unlike a direct loan which is offered directly from the USDA, borrowers who are interested in a guaranteed loan will need to reach out to a lender to start the process, however the lender must be USDA qualified.
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Can I Qualify for a USDA Home Loan?
All the strict requirements and guidelines may make it seem like a USDA loan is a complex thing, but in fact, qualifying for a USDA home loan is quite simple. Majority of the time, your eligibility will depend on the median income for your area, and how your personal income reflects on it. In other words, if your income is lower than your neighbors you have a better chance at qualifying for a USDA home Loan. If you think you have to live way out in the boonies to qualify, you’re wrong. USDA home loans are offered all over the country. In other words, you don’t have to buy a house that’s in the middle of nowhere with no close civilization to qualify, a modest home in a smaller town is just fine. Just don’t expect to be able to buy a condo in the middle of down town metropolis.
Home Loan Requirements
In order to qualify for a USDA Direct Loan, you must meet the following requirements:
- House must be in a safe living condition
- Borrower must be unable to qualify for a home loan from other resources
- Borrower must agree to live in the home as their primary residence
- Borrower must meet citizenship requirements
- Borrower must also not be suspended or debarred from participating in federal programs.
In order to qualify for a USDA Guaranteed Loan, you must meet the following requirements:
- Meet income eligibility requirements
- Agree to live in the home as their primary residence
- Meet citizenship requirements
- Meet credit obligations in a timely manner
- Purchase a property that meets program criteria requirements
Since income requirements are based off the median income level in your specific area, there is no income cut-off rule, it will all depend on where you live and how wealthy or poor your neighbors are. If you think you won’t be able to qualify, you should know that the USDA will often times extend these loans and if you’re worried about your ability to repay the loan, the USDA also offers assistance programs, especially for borrowers who used a direct home loan. The USDA offers incredibly low interest rates, payment assistance and a payback period up to 38 years.
Get started with your USDA home loan today, click the link below to be matched with a qualified USDA home loan lending specialist who is eager to help you with all your USDA home loan needs and answer any questions you may have regarding the USDA home loan programs or home loan process. It’s quick and easy and only takes a few minutes to get started! Click the link below to get started on your USDA loan today.
