Wednesday, June 10, 2020

What You Need to Know About Getting a USDA Loan

A home is the average family’s most expensive investment. Saving for a down payment can be difficult in today’s economy, but there are programs that can help you acquire your home with only a minimal amount. The USDA loan program was initiated to help individuals and families in some suburban and rural areas afford their own homes.

What Is a USDA Home Loan?

A USDA loan is issued to eligible individuals who want to purchase or improve a home in a designated area. These loans are guaranteed by the U.S. government, which allows individuals to purchase a home without the need for a large down payment. USDA loans can also be used to renovate homes in these areas. Mortgage funds can be acquired in the form of loans or grants, to a designated level.

Benefits of USDA Home Loans

One of the greatest benefits of a USDA home loan is that you don’t have to accumulate a large amount of money for a down payment. Another benefit is that you can acquire a loan if you have a credit rating of 640, which is generally below the rating needed for a conventional loan. In addition, the interest rate you will pay for your USDA loan will be much lower than a conventional mortgage, which makes it easier to afford.

Eligibility For An USDA Home Loan

To be eligible for a USDA Home Loan, you must fulfill certain requirements:

  • You must be a U.S. citizen or permanent resident.
  • You must have dependable income for at least the past 24 months.
  • You must have an acceptable credit history, with no collections actions for the past 12 months.
  • The monthly payment for the loan must not exceed 29 percent of your monthly income, including the principal, interest, insurance and taxes. In addition, other debts should not be more than 41 percent of your income.
  • The property must be used as a primary residence.

Documents Requirements For USDA Loans

You will need to have proof of citizenship or permanent residency. You should also have at least two years of pay stubs or your tax returns. Papers regarding other debt obligations will also be needed. Your credit report and alternative records of credit, such as rental records or utility bills will be needed to establish your ability to repay the loan.

If you are interested in buying a home, a number of mortgage options are available. Some options are designed to promote homeownership in special areas or for particular groups. The USDA loan offers many benefits for individuals who are interested in living in rural areas of the country.

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