There are many loan types to choose from when you're considering buying a home, and several government-sponsored programs have been set up to help first time homeowners achieve their dreams.
One common government-backed loan type is the USDA loan.
What is a USDA loan?
A USDA loan is a type of mortgage secured by the U.S. Department of Agriculture. While there are some exceptions, most properties eligible for USDA financing are located in rural areas. Fixed-rate USDA loans are available for purchasing, refinancing, building, or renovating such eligible properties.
With as little as no down payment required, these loans may provide an affordable financing solution for lower-income buyers in eligible areas.
USDA guidelines and requirements
The requirements to qualify for a USDA mortgage vary by lender, but here are the basics:
- Area eligibility: In order to qualify for a USDA loan, your property must be located in what the USDA defines as an eligible rural area. To see if a property is in an eligible area, visit the USDA website.
- Income restrictions: While there is not necessarily a maximum loan amount for USDA loans, income limits do apply. Visit the USDA website to view income limits.
- Fees: There are fees associated with guaranteeing a USDA loan. However, they are typically quite a bit less than what you would expect to pay for mortgage insurance on a comparable conventional or FHA loan.
- Occupancy: The property financed must be used as an owner-occupied primary residence. Non-occupant co-borrowers are not permitted for USDA loans.
Is a USDA loan right for you?
So how do you know which type of loan is right for you? A good originator will listen to your needs, evaluate your situation, educate you on different loan products, and help you select the right loan for you.