One of the Best Rural Housing Options: USDA Home Mortgage

usda loan income limitsThe rural nature of USDA home loans might have played a part in creating its “farm loan” reputation. Many people have the misconception that these loans can only be used to purchase homes in agricultural regions of the country, which is actually not the case. The reality is that most areas outside metropolitan centers can be acquired with a USDA home mortgage.

The great thing about the USDA loan is that it can be used to purchase, build, or renovate a property. It also comes with flexible options to accommodate more people who are in need of a safe and proper dwelling. If you have any credit rating, income, or down payment concerns, this rural housing program can offer you an affordable mortgage deal without the lofty financial requisites common to most conventional loans.

Types of USDA Home Mortgage

USDA housing programs are designed for households with moderate to meager income levels. Currently, it comes in two types:

  • The USDA Guaranteed Home Loan

The better-known type of the two, guaranteed loans come in 15-year and 30-year fixed-rate terms. It is offered by banks and approved mortgage lenders around the country. To qualify, your gross earnings must be within 115% of your location’s area median income, adjusted to household size.

  • The USDA Direct Home Loan

This loan is available only to households with low to very-low monthly incomes, which fall somewhere in between the 50% to 80% of the AMI. As the name suggests, the loan is issued directly by the USDA. To take advantage of this USDA loan option, you should approach or contact the USDA office in your locale.

Key Benefits of the USDA Home Mortgage

  • No down payment required

As a matter of fact, the USDA loan is one of the scarce mortgage programs that offer zero-down payment to applicants who meet the desired financial standards. Other than the VA loan, which is exclusive to military personnel on active service, veterans, and their spouses, no other loan option has this feature.

  • Flexible credit requirements

Unlike most loans, USDA mortgages are not credit-score driven. While a FICO score of 640 is required to get a streamlined approval process, the loan guidelines extend consideration to people who may have fallen into bad debt and credit-payment histories due to past circumstances that they don’t have control over. Of course, they should have already recovered from those circumstances to be deemed credit-worthy for a USDA mortgage.

Those who have been discharged from bankruptcy for more than 36 months may also qualify for the loan.

  • Low rates

Once you get approved for a USDA loan, you will benefit from its low-interest rates and monthly insurance fees. Aside from that, you may also choose to roll the closing costs into your monthly payments.

As long as you meet these requirements, and the property that you desire is within the USDA eligible area map and compliant with the HUD’s structural and livability standards, you have a high chance of being granted approval.

If you once equated USDA loans to farms loans, then you apparently had the wrong idea. Don’t cross out the USDA financing just yet. It could be the right one for you.

by jkyle