What is a USDA loan?
USDA loans are sponsored by the United States Department of Agriculture, and the program is aimed at promoting homeownership in communities that are less dense and more rural. USDA loans are probably the best kept secret in the mortgage world, but they’re a wonderful option, since USDA loans require no down payments. Additionally, USDA loans typically have lower mortgage insurance and are more lenient when it comes to credit score requirements. And, unlike VA loans, which are the only other zero-down-payment mortgage option, there’s no military service requirement with a USDA loan.
What are the qualifications for a USDA loan?
In order to be able to take advantage of a USDA loan, the property you are buying must be located within an eligible area. In general, in order for homes in a city or town to be eligible for a USDA loan, the population can be no more than 20,000. However, there are some exceptions for bigger cities, particularly is there is poor access to mortgage credit or it is considered to be “rural” in character. You might be surprised to learn that many suburban areas have available USDA home loan, many of which are just outside of large metropolitan areas.
Once you find a home that is eligible for a USDA loan, there are a few other qualifications you’ll need to meet. The USDA requires that your income be no more than 115 percent of your region’s median income. Additionally, you must be U.S. citizen and have at least 24 months of dependable employment history. If your credit history is 640 or higher, you’ll qualify for streamlined processing. But, even borrowers with limited credit or no credit may qualify with other credit references, like utility and rental payment history.
Is a USDA loan right for you?
The USDA loan program is great option for most people looking to buy in a rural area, particularly if you don’t qualify for a conventional mortgage. We work with the Traci Gratzek from NOVA® Home Loans to provide you with the financing options you need to get the home of your dreams.
Contact us today to find out if a USDA loan is right for you!