USDA First Time Buyer

USDA first time home buyer loan

This is a wonderful moment for anyone buying a home for the first time. However, to qualify for any loan, a down payment has to be made. However, people who are willing to buy a home for the first time do not have enough down payment savings. Fortunately, USDA offers fast time home buyers the ability to buy a home without any down payment.

This guide covers how USDA loans are convenient for first time home buyers. 

How Are USDA Loans Convenient For First Time Home Buyers?

The USDA provides multiple benefits simultaneously to eligible rural borrowers. The benefits are mentioned:

  1. 0% down payment

One of the biggest benefits for first time home buyers is the opportunity to finance without any downpayment. USDA loan is a very popular and rare program in the United States which does not require any downpayment requirement.

  1. Flexible qualification requirements

The USDA loan, backed by the government, guarantees to protect the lender from the risk of default. This loan has flexible qualification requirements and its interest rate is very low. Also, the credit card requirements and other terms are very flexible and easy to access.

  1. Low mortgage insurance

USDA mortgage insurance is also known as an upfront guarantee fee. The upfront guarantee fee is 1 per cent of the loan amount which is very low compared to other loans. In addition, the annual guarantee fee of this loan is 0.35%. The FHA loan requires a 3.5% down payment, with an upfront fee of 1.75% and an annual fee of 0.85%, which is much higher than a USDA loan.

Who is eligible for a USDA loan?

USDA loans have requirements for both the borrower and the property. The borrower must meet the requirements of the lender. In addition, they will qualify for a loan by meeting the requirements of the credit score and the income limit. If the borrower’s credit score is 640 or higher, then automatic underwriting will be included. However, even if the credit score is less than that, the borrower may qualify for the loan but may have to meet strict requirements.

Eligible homes for USDA loans will be located in rural and suburban areas. Also, the house purchased must be the primary residence of the borrower. According to the USDA’s rural definition, about 97 per cent of the land in the United States belongs to the USDA.

How Much Money Can You Make?

Before you buy your home you must think about how much you can afford. Your monthly payments will come based on your and your family’s income, loan amount and down payment. However, your DTI cannot be more than 41%, in simple words, your loan amount cannot be more than 41% of the total income.

FAQs:

Why USDA Loans are the best?

The purpose of the USDA loan is to help people in rural and suburban areas buy affordable housing.

How Does a USDA Home Loan Work?

The USDA loan has more flexible requirements than other conventional loans, as the program is supported by the Department of Agriculture.

This loan comes with a fixed interest rate for 15 years and 30 years. Also, if you are a member of the USDA Loan, you can refinance. If you cannot refinance, you are using another type of loan.

What qualifications are required for a USDA loan?

  • You must have a minimum credit score of 620 or higher.
  • The home must meet USDA property requirements, meaning the home must be in a rural or suburban area.
  • You and your family’s income limit cannot exceed the USDA’s rural income limit.

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