If you don’t have a massive monthly income but want to own a home in rural and suburban areas, US Department of Agriculture’s loan options can help. No, you don’t have to be a farmer to get the loan, and you can choose to get varied range of financing choices. USDA loans are also great for people who don’t necessarily qualify for traditional financing. There’s no down payment, and you get a fixed-rate mortgage, usually repaid in like 30 years.
In this post, we take a look at different USDA loan options.
- USDA Guaranteed Loans. The interest rate on Guaranteed Loans tends to lower than traditional loans. As with USDA loans, you must be staying in what’s known as “approved area”. With any form of funding from USDA, location and income of the borrower are considered. You can check an article just released to find if you qualify for the loan. Requirements also include paying for mortgage insurance, and you must be a US citizen to apply. Also, the debt payments each month should be less than 41%. Credit score must be 640 or more.
- USDA direct loans. These are technically not loans, but grants, with payments as low as 1%. There is down payment required, and you must qualify for income and location limits as with guaranteed loans. Direct loans are meant for extremely low-income families, and often in cases when the applicant cannot get the loan from traditional sources. Please note that the house must be your primary residence and cannot be used for commercial gains.
- USDA home improvement loans and grants. Homeowners can avail this option to upgrade, repair and improve their homes. This is reserved for extreme low-income groups and can be a mix of both loan and grant, amount not exceeding $27,500 in total. The grant amount need not be repaid, while the loan should be repaid with a low interest rate of 1% within 20 years. You can only get such grants and loans when you are unable to get money from traditional financing methods. Also, your income will be considered, which should be lower than 50% than that of area median income. Grants are reserved for seniors who are over 62 years.
USDA loans can be really handy, provided you do not have the choice to go for traditional loans. People who don’t have a credit score can also choose to apply, and in some cases, low score issues can be ignored.