USDA home loan Programs

The US Department of Agriculture (USDA) is a mortgage without any down payment, designed specifically for low-income rural residents. If you are a villager and do not qualify for a conventional loan, you can easily qualify for a USDA loan.

This home loan is specifically designed to help those with low incomes and living in unhealthy and unsafe places. This program helps them to buy a house in a sufficient place.

There are two main types of USDA home program loans: USDA guaranteed loans and USDA direct loans. No downpayment is required if you qualify for any one of the loans.

Types of USDA home loans program

There are two main types of USDA home loan programs: USDA guaranteed loan and USDA direct loan.

USDA guaranteed loan

Borrowers with low-to-moderate income are more likely to qualify for the USDA Guaranteed Loan Program. USDA guarantees 90% of the loan amount to applicants who qualify for the loan. They get a mortgage from a bank or a third lender. The biggest advantage of this program is that there is no downpayment. It also comes with a fixed interest rate and a loan term of 30 years.

You can use the money to buy a primary home, repair and renovate a home. However, the borrower has to pay 1% of the loan amount as a loan guarantee fee. However, if you are not able to pay this fee, the fee will roll into your loan, which will be paid by the lender. However, the borrower has to pay an annual fee on the loan amount which will be 0.35%. However, interest rates vary from lender to lender. So shop around to get the best interest rates.

For single-family homes: Single-family home program mainly works with those who have low-to-moderate income. USDA guarantees borrowers up to 90% to reduce the risk of financing 100%.

For multi-family home: The main purpose of this program is to help those who have low-to-moderate income and have a multi-family to rent a house at an affordable price. The 30% rent for individual units is set at 115% in the middle-income area. But if you want a house of more than five units, it has complexity.

Requirements to qualify for this loan are:

  • Down Payment: 0% down payment
  • Property or asset: None
  • Debt-to-income ratio: 41%.
  • Credit Score: No minimum. However, if your credit score is 640 then you will easily qualify for the loan.
  • Income: Low to moderate-income
  • Property Location: Rural area.
  • Property location: Must be primary accommodation.

Direct USDA Loan

Direct USDA loans provide financial assistance to borrowers who are low- and low-income and not qualified for other conventional loans, and the program comes directly from the USDA.

This program helps a borrower to qualify for a mortgage and reduce the monthly payment. The amount of money will depend on the income of the individual and the size of the family. The term of a loan is usually 33 years, but it can be up to 38 years.

Requirements to qualify for this loan are:

  • Down Payment: 0% down payment
  • Property or asset: None
  • Debt-to-income ratio: 41%.
  • Credit Score: The standard credit score is 640. However, if you have a low credit score or no credit score, you will qualify for a loan.
  • Income: Low to very low income. However, the limit varies based on country and family size.
  • Property Location: Rural area. The area has a population of 35,000 or less.
  • Property location: Must be primary accommodation.

USDA direct loan vs. USDA guaranteed loan: How do they differ?

Loan Type USDA direct loan (single-family) USDA guaranteed loan (single-family)
Main qualifications Low to very low income Low to moderate-income  
Loan limits Area loan limit No limit
Loan terms 33 years; 38 years for a very low-income borrower. 30 years

How do you get a USDA home loan?

For a guaranteed loan, you need to find an approved lender from the USDA list. Then shop around to get the best deals.

Direct loan financing comes directly from the government. So if you qualify for a loan, apply directly to USDA Rural Development. Then meet the requirements and wait for the cash.

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