What Is A Usda Home Loan?

Posted on Posted in Property Finance & Mortgage

The US Department of Agriculture is not only concerned with ensuring the food security of this nation, it is also instrumental in making the dreams of owning a home for many rural and suburban folks a reality. Much like the Federal Housing Administration and the Veterans Affairs, eligible individuals can now apply for the USDAs Home Loan Program to give them the home of their dreams.

The USDA Home Loan Program requires no-down payment and low-interest schemes to homebuyers who are earning low to moderate incomes. The properties should be situated in eligible suburban and rural communities and should be owner-occupied only. Generally, it is a lot easier to qualify for a loan compared to conventional mortgages.

There are three types of USDA Home Loans that interested parties can avail of: –

(1): Direct Loans These are directed for individuals who are classified as low- to very low-income earners. The income limits are dependent on the region where the applicant is residing.

(2): Loan Guarantees These are mortgages issued by a local lender that is a participant to the USDA Home Loan Program. The mortgage is guaranteed by the USDA and offers zero down payment schemes or even at low mortgage interest rates. Availing of the zero down payment scheme usually comes with an insurance premium, however.

(3): Home Improvement Grants and Loans These are intended for eligible homeowners who wish to make improvements or repairs in their homes. It is possible to combine a grant and a loan which can amount to $27,500 in aid.

Aside from the zero-down payment scheme offered by the program, it also allows homebuyers the chance to roll their closing costs, which can typically run between 2 and 5 percent of the purchase price of the property, right into the mortgage. What this simply means is that the program will finance at least 100% of the purchase price.

The USDA Home Loan Program also boasts of low mortgage insurance premiums. While VA loans do not have mortgage insurance, the USDA HLP only requires an annual insurance premium of 0.30%. This is lower than the insurance premium sought by the FHA at 0.85 percent. On the average, eligible USDA HLP borrowers can save as much as $100 per month compared to FHA loans. There are fixed rate options as well, pegged at either 15 or 30 years to give eligible homebuyers the chance to make more sensible decisions based on their ability to pay.

The USDA Home Loan Program makes it easy for eligible individuals to own their home. With zero-down payments and low interest rates, owning a home is now within ones grasp.