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USDA: One of the best loans you’ve never heard of

April 26, 2022
Posted in Programs
April 26, 2022 derekevansteam

Did you know that the U.S. Department of Agriculture backs a loan program called the Rural Development Guaranteed Housing Loan program? Most people have no clue this type of loan exists, but it’s actually one of the best programs out there. Its purpose is to make housing more accessible to low-to-moderate income families and individuals in order to stimulate economic growth in rural and suburban communities throughout the United States. 

Now you may be thinking, “I’m not even close to a rural area, this isn’t for me!” But you’d be surprised at the locations that qualify – many are within 20-30 minutes from densely populated cities! Keep reading to find out if you qualify.

Do you qualify for a USDA loan?

Like any loan, you will have to meet certain qualifications in order to be approved. These are:

  • U.S. citizenship or permanent residency
  • Dependable monthly income, BUT you may not make more than 15% more than the local median income. View median incomes for your county here to see your eligibility.
  • Minimum credit score of 640
  • Debt-to-income ratio of 41% or less in most cases
  • Home must be used as primary residence (no investment properties)

There may be a few more stipulations based on which state you’re looking in, but you can always connect with one of our loan officers to determine your specific eligibility!

What properties can qualify for a USDA loan?

Even if you as an individual qualify, you must also ensure that the property you are trying to acquire also meets the standards for a USDA loan. These are:

  • Home is 2,000 square feet or less
  • Home has a market value below the area loan limit
  • Property lies within a USDA-approved zone. To check whether or not the home you have your eye on lies within an eligible area, the USDA offers this handy address search tool.

Benefits of a USDA loan over other loan programs

Like we mentioned, a USDA loan is one of the best programs we offer aside from the VA loan. Potentially even better due to the fact that more people qualify to take advantage of USDA loans. Here are some of the great perks:

  • No down payment required. Probably the most significant benefit to the USDA loan is that there is no down payment requirement. The only other loan program with this is the VA loan.
  • Superior interest rates. Since the USDA backs each of these loans, most of the time we are able to offer buyers a better rate. 
  • Low funding fees and no PMI. Unlike most traditional mortgages where you have to put a certain amount down to avoid costly added monthly fees, USDA loans don’t require much. There are two fees you will see: 1) an upfront guarantee fee that is paid upon closing the loan (1% of total financed amount) 2) an annual fee that goes into your monthly mortgage payment (0.35% of loan’s current balance). 
  • Flexible qualification guidelines. The USDA loan is intended to help low-to-moderate income earners afford a home, so the requirements are lax when it comes to financial health. There is no minimum credit score required, though to be accepted through the USDA’s automated underwriting system, a score of 640 or higher is required. 

It’s worth looking into

If you have a home or area you’re looking into purchasing in that’s even slightly off the beaten path, it’s worth putting it into the USDA’s address search tool just to see if you may be eligible. One might think it’s difficult to locate one of these qualifying homes or areas, but according to the USDA, these rural development loans are available in approximately 97% of the nation’s land mass. We are a certified USDA lender, so if you’d like to see about taking advantage of one of the best kinds of loans out there, contact us or apply today!