A home loan from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan offered to rural property owners by the United States Department of Agriculture.
The advantages to having private mortgage insurance for the borrower. When you take out a policy you to pay a lesser percentage amount as a down payment. The minimal down payment is 5% with PMI. This insurance is required if you borrow more than 80% of the total purchase price of a home or if you are over 80% Loan to value (LTV) on a refinance.. For example, on a home that costs $200,000, with 5% down payment you would only have to come up with $10,000 down payment plus cost. This is a difference of $30,000 under regular circumstances of 20% down.
A USDA home loan is different from a traditional mortgage offered in the United States in several ways.USDA loans require no down payment, you may finance up to 100% of the property value.
You must meet the income restrictions for the County you are interested in. Each county has a maximum Income Requirement. The USDA Home Loan Program does allow for considerations for expenses like Child Care.
To be eligible, you must be purchasing a property in a rural area as defined by the USDA.
The home or property that you are looking to purchase must be owner-occupied, investment properties are not eligible for USDA loans.
Types of USDA Loans
Applicants for home loans may have an income of up to 115% of the median income for the area. Families must be without adequate housing, but be able to afford the mortgage payments, including taxes and insurance. In addition, applicants must have reasonable credit histories. Additionally, the property must be located within the USDA RD Home Loan "footprint." The USDA Home Loan maps are currently scheduled to be changed on September 30, 2013.
Approved lenders under the Single Family Housing Guaranteed Loan program include:
Any State housing agency; Lenders approved by: HUD for submission of applications for Federal Housing Mortgage Insurance or as an issuer of Ginnie Mae mortgage backed securities; the U.S. Veterans Administration as a qualified mortgagee; Fannie Mae for participation in family mortgage loans; Freddie Mac for participation in family mortgage loans; Any FCS (Farm Credit System) institution with direct lending authority; Any lender participating in other USDA Rural Development and/or Farm Service Agency guaranteed loan programs.
Purpose: The Very Low-Income Housing Repair program provides loans and grants to very low-income homeowners to repair, improve, or modernize their dwellings or to remove health and safety hazards.
Eligibility: To obtain a loan, homeowner-occupants must be unable to obtain affordable credit elsewhere and must have very low incomes, defined as below 50 percent of the area median income. They must need to make repairs and improvements to make the dwelling more safe and sanitary or to remove health and safety hazards. Grants are only available to homeowners who are 62 years old or older and cannot repay a Section 504 loan.