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100% USDA Financing No Down payment

Did you ever dream of simply leaving the city and going to live in the countryside? Is the rural landscape a lot more appealing to you than pavements and concrete buildings? Then a USDA loan might be the solution to your every question. Because thanks to the US Department of Agriculture mortgage and loan program, you can now buy a home in the countryside which might have seemed out of your reach before. Here’s everything you need to know about the loan itself and to get it.

USDA Loan

What is USDA loan?

Designed to “improve the economy and quality of life in rural America”, the Rural Development program or USDA RD, aims to help families that wish to relocate from urban areas to rural ones. It does this by offering appealing loans with very low-interest rates and no down payments. Apart from that, loaners are always surprised to find out how accessible such a loan really is. In 2014 alone, the USDA invested some $20 billion and helped approximately 140 000 families buy and improve their rural houses.

But how do you know if the USDA loan is right for you? Moreover, how do you know if you’re qualified to get it? Read on, as we have all the answers on this matter.

How does an USDA loan program work?

In case you were asked to ‘define rural devlopment loan,’ the first thing you need to know is that there are three types of USDA home loan programs. Knowing this crucial piece of information right from the start will make it a lot easier for you to choose and apply to the correct program for you.

  1. Loan guarantees – This particular type is actually a mortgage that is issued by a local lender which is participating in the program. In this way, this loan type is similar to the FHA and VA-backed type of loans.
    The main positive thing about this USDA loan model is that it allows you to get the lowest interest rates possible, even if you don’t put down any down payment. However, if you don’t deposit any money or put a tiny amount, you will be required to pay a mortgage insurance premium.
  2. Direct loan – unlike the first type, which is issued by a stand-alone loaner, backed by the USDA, these loans are granted directly by the governmental program. They too are a kind of mortgage and are directed towards low- and very low-income applicants. As far as thresholds go, they depend on the region you wish to buy the property in. Interest rates, however, can be as low as 1%, with subsidies.
  3. Home improvement loans and grants – these refer strictly to improvement and repair projects you might have in mind. They are basically a financial award that allows you to upgrade your rural home. You can opt for a loan or a grant, or you can combine the two. The USDA program can lend up to $27 500 in this case.

USDA Loan

What are the requirements for an USDA loan?

Now that you can answer the question ‘what is a rural development loan’, it’s time you started learning about the requirements. When you start analyzing your prospects and your chances of qualifying for a USDA loan, the first thing you need to look at is your income limit. It depends on the geographical area you live in and on your household size.

Apart from this preliminary information, you also need to check out on the following requirements.

  • You must be a citizen of the United States or have a permanent residency here.
  • You must be able to sustain a monthly payment out of your income – the USDA loan will claim 29% of your salary every month. If you have other debts to pay every month, the entire sum cannot exceed 41% of your monthly income. Despite these regulations, though, the USDA will consider a higher debt ratio should your credit score be greater than 660. Therefore, one thing you can do here is to try and improve your credit score as much as possible.
  • You need to make proof of a dependable income, at least for the first 24 months.
  • You must have a decent credit history. This means no accounts of yours should have been converted to collections in the last 12 months prior to you applying for the USDA loan. However, there are some cases in which your “bad” credit score was not entirely your fault, such as mistakes or medical emergencies. It’s best you try to fix these up with your bank, but if they are not willing to help, the USDA will overlook these cases.

Depending on your credit score, you may have to apply to the following standards:

  • A credit score equal to or higher than 620 will benefit from streamlined processing
  • A credit score below 580 will have to comply with more stringent standards.
  • Applicants without a credit score may still qualify, but will have to present ‘nontraditional’ references to their credit, such as utility payment history or rentals.

 

How does a USDA loan work?

As mentioned above, a loan issued or backed by the USDA is essentially a mortgage. It will help prospective home buyers that have proved they have the greatest need. This means the following.

  • An individual or a family that finds itself without a decent, “safe, and sanitary housing.”
  • An individual or a family that has been unable to get a loan from a traditional source
  • An individual or a family that have a low income as far as the area they live in is concerned.

The USDA, when not working via lenders, can issue loans itself. They will regard homes that are 1 800 square feet or less and that have a market value below that particular area’s loan limit. That limit varies depending on where you live. Home loans themselves can go as high as $500 000 and even more, should you live in California or Hawaii, for example. These areas are known to be very pricey when it comes to real estates. But loans can go as low as $100 000, too, should you live in rural America. However, just for you to have a general idea of the loan, the USDA usually issues average loans of $216,840.

It’s also good to know that all metropolitan areas are excluded from this program, but you can find some suburb location the USDA might approve of, so don’t be afraid to ask. All rural areas are eligible, no matter which part of the country they are situated in.

 
 
 

 

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Gina Odom
Fayetteville, NC 28305
Phone: 910-584-7705
Email: Ginaodom2002@yahoo.com
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