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USDA Loans are a government program that helps lower income people purchase homes in rural environments. The USDA loan program provide flexible options for borrowers as fixed rate or adjustable-rate USDA mortgages. The ability to buy a home with little to no down payment makes USDA loans an empowering way for buyers that may otherwise not be able to afford a property to become homeowners.

What is a USDA Home Loan?

USDA loans are designed to encourage development and growth of land in rural areas. The U.S. Department of Agriculture backs USDA loans similarly to how the Department of Veterans Affairs backs VA loans. This backing gives borrowers access to mortgages they may otherwise be unable to obtain with conventional loans. These loans typically require less money down as well since the lenders are assuming less risk.

Who Can Use the USDA Mortgage Program?

Those living in agricultural settings are not the only people eligible for USDA loans. The loan is primarily designed to help individuals with low to moderate income afford primary residences in areas defined as rural.

Borrowers need to meet income requirements to receive a USDA loan. The home must be their primary residence and be located in an eligible rural area. The USDA loan can be used for existing homes, new homes, and properties in need of renovation. Search any address on the USDA’s website to evaluate its eligibility, or get this info by speaking to your lender.

The USDA is a great resource for aspiring homeowners in rural areas who are challenged to accumulate the savings required for a down payment on a traditional mortgage loan.

How USDA Loans Work

USDA loans enable eligible homebuyers to purchase a home with a down payment as low as 0%. They are typically available at 15, 20, 25 and 30-year terms with fixed rates. Adjustable rate mortgages with 5-year terms are available as well. A popular feature of USDA loans is that they do not require private mortgage insurance (PMI). Homeowners can pay off the entirety of their mortgage at any time within the term without being subject to penalties.

Qualification Requirements for USDA Loans

For a property to be eligible for a USDA home loan, it must be in a rural area with a population of 35,000 or less. This means that USDA loans are only available in certain areas. Potential buyers can consult a specialist to determine if the loan is an option for their situation. Income limits for these loans will depend on factors such as where you live and the loan program that you are applying for. USDA home loans must be for a buyer’s primary residence. The home must be in an area defined as rural. Borrowers need to meet down payment requirements, have incomes that do not exceed specified limits, and have a debt-to-income ratio of 41% or lower. There is no minimum credit score to apply. USDA loans can allow a buyer to purchase a home with no money down, and homeowners can refinance up to 100% of their home’s value.

Benefits of USDA Mortgage Loans

  • No down payment required
  • No credit score minimum requirement
  • Low, fixed interest rates
  • Available for refinancing as well as purchasing property
  • Sellers may pay closing costs

Have any questions about USDA loans or their rates?  Give us a call at Thompson Kane & Company! One of our USDA mortgage specialists would be happy to answer all of your questions about the specifics of USDA loans, qualifications, and terms.

**Thompson Kane & Company is not affiliated with or acting on behalf of or at the direction of the FHA, VA, USDA, or the Federal Government.

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