Buying your first home is a big financial decision, and not everyone can afford a posh apartment bang in the city. If you are interested in buying a house in a rural area, you may be eligible for USDA home loans. To get the loan, the location must be approved by United States Department of Agriculture (USDA) Rural Development, and if you get the nod, you can buy the property with little/ zero down payment. Here’s more on what you need to know.
Pros and other aspects
USDA has launched this loan program with the intention of developing both life and economy in rural areas. With a nominal interest rate and zero down payment, owing a home becomes extremely easy. Also, you get 30-year fixed rate mortgages, with purchase and refinance options. In a way, it’s a win-win situation both for the government and home buyers.
Understanding USDA home loan better
There are three options in USDA home loan programs. The first one is a loan guarantee, where USDA guarantees for the mortgage, which means that the local lender will find trust in the buyer and that can translate in lower interest rate. You will still have to pay the premium, but there are no concerns as far as down payment is concerned. The next option is a direct loan from USDA, which are offered for people who have very little income. There are considerable subsidies, and one can get low interest rates (often even 1%). There are also special loans that are offered by USDA for homeowners to facilitate home improvement. Usually, a loan is provided, but in some cases, one can get a loan and a grant. You can click here to learn more about how to do USDA home loan requirements.
Eligibility and more
Please note that that income limit of the application is considered for USDA home loans, and this can be different for different locations. Things like household size is also considered. Also, these loans can be only used for primary residences, where the owner is occupying the property. Basic criteria include U.S. citizenship and a reliable source of income. The applicant should have the ability to a pay a monthly payment towards the loan, which should be 29% or less of the gross monthly income. Other debts shouldn’t exceed 41% of the total income. The credit history of the applicant is also checked, and it is important to have score of at least 640 to qualify.