Things to remember when researching for a home loan; knowing what and how much you can afford and finding not only the best loan, but lender as well. In 2014 the USDA invested twenty billion dollars to help nearly 140K families buy their own home. The program these families were able to use was designed to improve the economy and quality of life. This program offers not only low interest rates, but also little to no down payments and it’s quite easy to be approved.
What Makes USDA Loan Programs Work
There are three aspects to USDA mortgage loan programs;
- Loan Guarantees
- Direct Loans
- Home Improvement Loans
The USDA will guarantee a mortgage that is issued by a local lender, this program is similar to the FHA and VA backed home loans. This program offers borrowers lower interest rates, even without a down payment. However, borrowers will still have to pay a mortgage insurance premium if they put little or no money down.
These loans are issued by the USDA and are for low-income applicants. The income requirements vary by area, but with subsidies, interest rates could be as low as only 1%.
Home Improvement Loans
These types of loans are basically financial perks allowing homeowners to repair or upgrade their homes. These packages can also be combined with another loan or grant up to $27,000 for home repair assistance.
The income limits to qualify for a USDA backed home loan vary by location and will depend on the household size. The USDA guaranteed home loans can fund only borrowers who intend to live in the home. Other requirements needed to qualify are;
- You must be a U.S. Citizen or have permanent residency
- You must have dependable income and be able to afford the monthly payments- this includes the principal, interest, insurance and taxes. Also other financial responsibilities may not take up more than 41% of your income, however the USDA may consider higher debt to income ratios if the borrower’s credit score exceeds 660.
- Your credit history must reflect no collections or derogatory remarks for the last 12 months, not including medical payments. Those with credit scores of a 620 or higher may receive streamlined processing. Those with low credit scores, below 580 have stricter qualifying standards. For applicants with no credit score at all may be able to qualify as non-traditional, by providing credit references, such as a rental history or utility payment history.
How Does it Work
The USDA issues mortgages to those deemed to have the greatest need. This means that the borrower or family is without a decent, safe, or sanitary housing. Also, if the family is unable to secure a home loan from a more traditional source, or has an adjusted income and falls below the low-income limit for the area. The USDA will usually issue a direct loan for homes of 1800sqft or less. They are usually listed below market value.
The Next Steps
To apply for a USDA loan, a USDA direct mortgage or home improvement loan or grant you can talk to a qualified lender.