How to Qualify for a USDA Loan
If you feel more at home when surrounded by acres of pasture, the USDA – US Department of Agriculture – makes it possible for you to buy an affordable house. This loan program is not well known by people. The zero-down payment mortgage makes it easier for people who live in rural areas to afford homes.
You do not need to be a rancher or farmer to qualify for a USDA home loan. You just have to live in a qualified suburban, rural, or semi-rural region. Actually, 97 percent of the USA is eligible for this home loan. There are three kinds of home financing that USDA offers:
Single Family Direct Loans
These subsidized grants reduce mortgage payments for a short while. As a borrower, you are required to pay a portion or the full payment of the subsidy received over the loan’s life as soon as you stop living in the house or transfer the property to another person.
Your adjusted family income will determine type of assistance that you receive. To qualify for this loan, you must have been unable to obtain a loan from other sources. Moreover, the home must be 1,800 square feet or less and it should be your primary residence. This means that you cannot get this loan if you are looking to buy a vacation home.
Single Family Guaranteed Loans
You can use this type of USDA financing for building, refinancing, rehabilitating, buying, and relocating a residence. Closing costs as well as other customary expenses that are related to the acquisition might be included in the transaction. USDA-backed loans usually have lower rates than conventional bank loans and FHA loans.
If your credit scores are average, your mortgage rates can be 1 percent or more below those of conventional loans. To qualify for a USDA-guaranteed loan, you must live in any of the approved areas: rural regions with populations of below 35,000 dollars. However, a suburban area might qualify.
You should also have a moderately low income for the place you live. You should know that USDA loans also require mortgage insurance when refinancing and purchasing a home. To qualify, you also need to be a US resident who wants to buy a primary residence and can afford to repay the loan.
Make sure that your minimum credit score is 640 to qualify. If your credit score is bad, you should take some time to repair it before approaching the USDA for a loan. People with lower credit scores have to meet stricter underwriting standards.
Single Family Housing Repair Grants and Loans
These loans allow low-income earners to improve, repair, and modernize their homes. Elderly people who earn very low incomes can also use these loans to remove safety and health hazards. The maximum amount that you can get for a loan is 20,000 dollars while the maximum for a grant is 7,500 dollars.
You can apply for a loan and grant if you need 27,500 dollars. The repayment period for the loan is 20 years and the rate of interest is fixed at 1 percent. To apply, you must be the owner of the home that you want to repair and you should have been unable to get affordable credit from other sources.
Moreover, your family income should be less than 50% of the location’s median income. If you want a grant, you must be 62 or older and lack the ability to repay a loan.
If you want to apply for a USDA loan, you need to get in touch with a participating lender. Remember that your occupation does not have anything to do with the qualification process.