What Every Homebuyer Should Know About USDA Loans
Homebuyers who are unable to provide a down payment at the time of closing often opt for a USDA loan to ease the burden of purchasing a home. The program offers many advantages for buyers, but the inclusion of mortgage insurance adds to the cost of a monthly mortgage. Consult with a lender to determine if this loan type is the best option for you.
USDA loans, also referred to as rural housing loans, are insured by the U.S. Department of Agriculture. This loan type is similar to loans you apply for with private lenders, but the loan does not require a down payment and utilizes quick and easy loan approval standards for homebuyers. Homebuyers can also finance 100 percent of the purchase price when opting for a USDA loan. The program is available to qualified repeat homebuyers and first-time homebuyers.
Qualified homebuyers must purchase a home located in a designated rural area as defined by the U.S. Department of Agriculture. Buyers must also show proof of income and gain approval based on credit scores, loan applications and an evaluation of income-to-debt ratios. All homebuyers who qualify for the USDA loan are required to carry mortgage insurance for a duration of the loan.
You can obtain a USDA loan through a lender of your choice as long as the lender supports the USDA loan process. The U.S. Department of Agriculture can provide homebuyers with a list of qualified lenders if they are unable to find a lender willing to finance a USDA loan.
Buying a home is often a confusing venture that leaves homebuyers confused and frustrated by different lending options. One type of loan program, known as the USDA loan, is often tricky because this government loan option only serves a small portion of the housing market. Homebuyers may be interested in learning about this type of loan as it allows eligible buyers a no-money-down mortgage financing option.