Worried about having a large down payment?
A USDA mortgage loan May Be Right For you. Don’t let the fear of a large down payment deter you from your dream of homeownership. Eligible buyers can own with ZERO down! Don’t forget: USDA loans aren’t just for country folk.
USDA mortgage loans are mortgages backed the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program and is one of the few loan options available that offer a no down payment mortgage.
Often referred to as the “Section 502” loan, the Rural Development Loan is sometimes thought best for properties only in country or farm land type regions. However, this is not the case. In fact, you might be surprised at just how many homes in and around more densely populated areas are USDA eligible.
To qualify for a USDA loan the property must be located in an eligible area and be rural. While sometimes confusing you may find that many small towns qualify and some suburbs around major metropolitan areas qualify as well.
You can find out if a property is eligible by visiting the United States Department of Agriculture website and entering in the exact address.
USDA loans are a great option for borrowers who may have less than perfect credit and are interested in buying a house with no down payment. In fact, one of the features of a USDA loan is that you can get financing for 100% of the loan if eligible. This means that you as the borrower may qualify to buy a house with ZERO money down.
Other features of the USDA loans are they can come with reduced mortgage insurance premiums and in some cases feature below-market rates. When considering a USDA loan you do have to keep in mind that there are household income maximums that vary by county. A licensed loan officer can let you know if your household qualifies.
Compared to conventional 30 year fixed loan rates, USDA rates can often be lower. Because these rates are lower and because it can require a ZERO down payment, USDA loans can be a better option than other government loans like the FHA and conventional loans.
It is not uncommon for many borrowers to have heard of the USDA loan option. It was not launched until the 1990’s and many lenders don’t offer it as an option. The few that do are able to provide their eligible borrowers with a great option for owning a home when they may not have qualified for other types of loans such as FHA loans or conventional loan programs.
Much like the FHA loan, USDA loans are partially self-funded. To keep the program running and available to buyers now and in the future, they require mortgage insurance. The mortgage insurance paid by current homeowners using the loan helps to continually fund the program.
Here are a few frequently asked questions:
What is the USDA program’s minimum downpayment?
The USDA has no down payment requirement. If qualified, you can finance 100% with a USDA loan.
Is the USDA loan program limited to first-time buyers?
No, the USDA Rural Housing Program can be used by first-time buyers and repeat buyers.
Is there a minimum credit score for the USDA loan program?
The USDA implemented a minimum credit score of 640 without a manual underwrite. Before that date, USDA set no minimum score for the program. However, most lenders did.
If you are without a credit score, your lender may accept “alternate” tradelines to establish credit history.
What’s the maximum USDA mortgage loan size?
There is no maximum loan size for the USDA loan program. Loan size is limited by the borrowers debt to income ratio (DTI). In most cases that limit is set to 41%. If the borrower has a credit score over 660, show stable employment and can demonstrate the ability to save, that ratio may be increased.
The Keystone Team at Keystone Alliance Mortgage does offer USDA loan options and is available to discuss with you whether or not a USDA home mortgage may be an option for you.
Speaking to a loan officer can help answer this and more if you are considering a USDA home loan.
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