Introduction To USDA Loans
Let us start off with a small introduction video to USDA loan. After the video we will look at finer details about the program, qualification criteria, pros n cons, benefits, loan limits, fees, negotiation fronts.
What Is A USDA Loan Program?
In 1991 the USDA (The United States Department of Agriculture) started offering loans for the development of rural and suburban areas to home buyers with low-to-average income for their area. They offer financing with no down payment, reduced mortgage insurance, and below-market mortgage rates.
Benefits Of USDA Loans Program
- NO money down
- Low interest rates
- 30 year fixed rates
- Government guaranteed
- Roll in your closing costs into the loan
- Flexible credit guidelines
The Two Types Of USDA Loan Programs
- Single Family Housing Guaranteed USDA Loans
The Section 502 Guaranteed Loan Program reduces the risk for approved lenders by providing a 90% loan note guarantee, who further provide a 100% financing to homebuyers. This USDA program provides low and moderate income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas. Eligible applicants may purchase, build, rehabilitate, improve or relocate a dwelling in an eligible rural area with 100% financing.
Under USDA guaranteed loan program the homebuyer must meet the following criteria:
- Income eligibility: The applicants income should not exceed 115% of the median income limit set for the county. For most part the county income limits are as follows:
- 1-4 Family members: $90,300/-
- 5-8 Family members: $119,200/-
- Must be a primary residence: The loan applicant must agree to live in the house under this program.
- Residence status: Loan program is limited to U.S. Citizen, U.S. non-citizen national or Qualified Alien.
For more details on guaranteed loan program consult USDA’s official website here. To apply for USDA Guaranteed home loan click here and an USDA expert will get in touch with you.
- Single Family Housing Direct Home USDA Loans
The Section 502 Direct Loan Program assists low and very-low income applicants obtain decent, safe and sanitary housing in eligible rural areas by providing payment assistance to increase an applicant’s repayment ability. Payment assistance is a type of subsidy that reduces the mortgage payment for a short time. The amount of assistance is determined by the adjusted family income.
Under USDA direct loan program the homebuyer must meet the following criteria:
- Income eligibility: The applicants must have an adjusted income that is at or below the applicable low-income limit. For the most part the low-income limits are as follows:
- 1-4 Family members: $52,300/-
- 5-8 Family members: $69,050/-
- Current home owners: Must be without a decent, safe and sanitary housing. All first-time home buyers qualify this criteria.
- Must be a primary residence: The loan applicant must agree to live in the house under this program.
- Cannot get a loan from bank/lenders: Are unable to obtain a loan from banks/lenders due to terms and conditions that can reasonably be expected to meet.
- Loan obligation: Have the legal capacity to incur a loan obligation
- Residence status: Loan program is limited to U.S. Citizen, U.S. non-citizen national or Qualified Alien.
Under USDA direct loan program the property must also meet some requirements, that are as follows:
- Eligible area: The house must be within an USDA eligile area. Generally, all rural areas with population below 35,000 qualify as eligible areas.
- Covered area: The covered area for the single-family home must be at or below 2,000 Sqft.
- Market value: The market value of the house should be below the applicable area loan limit. For most part the loan limits are set at $285,000/-
- Swimming pools: A bit odd, but the house cannot have an in-ground swimming pool.
- Cannot be income producing: The property itself should not be designed for income producing activities, like barn, farm etc.
For more details on direct loan program consult USDA’s official website here. To apply for USDA Direct home loan click here and an USDA expert will get in touch with you.
Note 1: USDA official website last assessed on 1st May 2021 for updated content and terms.
Note 2: Guaranteed and Direct are the two USDA programs for homebuyers. Guaranteed is materialized with the help of a lender but still has to be approved by the USDA.
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