USDA Loans
USDA Overview
The USDA is not just for the food pyramid. USDA loans are federally-backed loans (much like FHA or VA loans) that make purchasing a home easier in rural areas. Since these are part of a government program, buyers qualify with little or no down payment, and USDA loans often carry a lower interest rate.
There are restrictions, however. First and foremost, buyers must be looking to purchase a home in a qualified rural area. Additionally, the buyer’s adjusted gross income cannot exceed 114% of the median income in the area, your DTI (debt-to-income) must be lower than 50%, and a minimum 640 credit score is required.
To find out if a property is in an eligible location, visit the USDA eligibility website.
USDA Overview
The USDA is not just for the food pyramid. USDA loans are federally-backed loans (much like FHA or VA loans) that make purchasing a home easier in rural areas. Since these are part of a government program, buyers qualify with little or no down payment, and USDA loans often carry a lower interest rate.
There are restrictions, however. First and foremost, buyers must be looking to purchase a home in a qualified rural area. Additionally, the buyer’s adjusted gross income cannot exceed 114% of the median income in the area, your DTI (debt-to-income) must be lower than 50%, and a minimum 640 credit score is required.
To find out if a property is in an eligible location, visit the USDA eligibility website.
Benefits
- Most loans require a minimum down payment. This can range anywhere from 3.5 to 20 percent, depending on the financing option you’re interested in and other factors, such as your employment history, credit score and debt-to-income ratio. However, the USDA doesn’t expect borrowers to pay any money down.
- USDA loans often offer lower rates than other mortgages, which saves borrowers money as they pay back the loan. When you’re not spending as much money in interest, you’ll have more to utilize for other daily expenses or to invest and use at a later date.
- Most conventional lenders look for a credit score of at least 640, however you'll need something closer to 720 to qualify for the lowest interest rates.
- The vast majority of the United States falls within what the USDA considers an eligible, rural area. While the goal is to boost population in non-urban areas, the USDA's definition of rural areas casts a broad net.
- USDA loans don’t have any PMI requirements. “Instead,” USDALoans.com states, “these specialized loans come with both an upfront and annual forms of mortgage insurance. The good news is the costs of USDA mortgage insurance are significantly lower than on other loan products,” such as FHA or conventional loans.
Benefits
- Most loans require a minimum down payment. This can range anywhere from 3.5 to 20 percent, depending on the financing option you’re interested in and other factors, such as your employment history, credit score and debt-to-income ratio. However, the USDA doesn’t expect borrowers to pay any money down.
- USDA loans often offer lower rates than other mortgages, which saves borrowers money as they pay back the loan. When you’re not spending as much money in interest, you’ll have more to utilize for other daily expenses or to invest and use at a later date.
- Most conventional lenders look for a credit score of at least 640, however you'll need something closer to 720 to qualify for the lowest interest rates.
- The vast majority of the United States falls within what the USDA considers an eligible, rural area. While the goal is to boost population in non-urban areas, the USDA's definition of rural areas casts a broad net.
- USDA loans don’t have any PMI requirements. “Instead,” USDALoans.com states, “these specialized loans come with both an upfront and annual forms of mortgage insurance. The good news is the costs of USDA mortgage insurance are significantly lower than on other loan products,” such as FHA or conventional loans.
Requirements
- There are certain criteria a property must meet if you want to obtain a USDA loan, including its location. Luckily, you can easily check via the USDA’s website, which displays a map highlighting applicable areas.
- The home must be your primary home, not a vacation home or income property.
- Income must be within limits
- The property can't be a working farm.
- Your home appraisal must show the condition of the home meets USDA standards
- There are certain criteria a property must meet if you want to obtain a USDA loan, including its location. Luckily, you can easily check via the USDA’s website, which displays a map highlighting applicable areas.
- The home must be your primary home, not a vacation home or income property.
- Income must be within limits
- The property can't be a working farm.
- Your home appraisal must show the condition of the home meets USDA standards
