USDA Loans – Everything You Need to Know about USDA Home Loans

USDA Loans - Everything You Need to Know about USDA Home Loans

When most people think of government-backed mortgages, they think of the Federal Housing Administration (FHA). However, another option is available – the United States Department of Agriculture (USDA) Loan. This loan is designed for rural and suburban homeowners who want to buy a home without spending much money. Here’s what you need to know about USDA Loans. 

What are USDA home loans, and what do they offer? 

USDA Loans, or “rural development loans,” were created by the United States Department of Agriculture to help low and moderate-income families attain homeownership in rural areas. These loans offer numerous benefits: They have low-interest rates and provide funds for repairs and upgrades to the property. USDA Loans do not require private mortgage insurance premiums and provide lenient credit qualifications. 

Down payment requirement. 

The appeal of a USDA loan is that you don’t need to put down any money. And with cheaper mortgage insurance than many other low Down Payment programs, it may be just what your finances need! 

USDA Loan income limits. 

The USDA has set income limits for purchasing a home. The guaranteed loan program is available to those considered “moderate” earners, which the department defines as anyone earning up to 115% of their county’s median household income (in this case, $92 450). For instance, if you’re buying property in Calaveras County, California, then it will be your support that helps make sure these loans go towards something valuable!

What is the difference between USDA loans and FHA loans? 

  • Down Payment 

The U.S Department of Agriculture provides loans with no down payment requirements, which can make homeownership an option for buyers who might otherwise be excluded from the process!

If you want an FHA loan, make sure your down payment is at least 3.5%. Consider another option like conventional mortgages if it’s more than 10%! 

  • Credit Score 

The type of loan you are applying for will significantly impact your credit score.

The USDA loan program doesn’t have set credit requirements, but most lenders will require a score over 640.

The perfect FHA loan score is 579 or higher. If you have a lower credit rating, such as the 580-589 range, then be prepared to put down 10% on a home purchase with this type of financing – but don’t worry because there are other options available for those who can qualify! 

  • Location requirements

The USDA has a map that details which areas are eligible for their loans. You can check if your prospective purchase location allows it by looking at this nifty little guide!

With an FHA loan, you can buy a home anywhere in the country. You’ll find plenty of properties to choose from – four-unit apartments next door or spacious ranches just outside city limits!

The application process: what to expect and how to prepare?

Getting a USDA loan can seem daunting, but with some preparation, you’ll be ready to go. Here’s what you can expect during the process:

1. Get pre-approved for a loan. This will help you know how much house you can afford and give you an idea of what interest rate you’re likely to receive.

2. Find a home that meets USDA loan requirements. Ensure the house is in an eligible rural area and meets the property eligibility criteria.

3. Work with a qualified lender to get your loan processed. Lenders who USDA approves will know the ins and outs of the program, so they can help ensure everything goes smoothly.

4. Close on your loan and move into your new home!

Following these steps should help you navigate the USDA loan process with ease. If you have any questions, ask your lender for guidance.

Need Help?

Now that you know about USDA home loans and how they can benefit you, it’s time to start looking for a lender. Stone Tree Lending is a national leader in USDA financing, and we would be happy to help you get started on your loan application today. Contact us today to get started. We look forward to helping you achieve your homeownership dreams!

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