Many homeowners dream of having the perfect house, a place where their family can grow and prosper. However, not all homes are easy to come by. In some cases, it may be increasingly difficult to finance a home. If you are seeking a house in a rural or suburban area, you may be eligible for a USDA loan.
In today’s complicated housing market, countless people are seeking homes. These homes can vary from small urban dwellings to sweeping farm houses in the middle of literally nowhere. Whether you seek a city house or a rural one, you have options.
Before beginning the mortgage process, you should consult a mortgage broker. Mortgage brokers act as middlepersons between you, the borrower, and any potential lenders. Although lenders provide you the financial backing for your loan, brokers do not.
Rather, brokers provide help by guiding you throughout the mortgage application process.
A broker can help you gather the necessary information and paperwork. A seasoned loan broker will also help you ‘shop’ around with different lenders. In some cases, your mortgage loan broker may be able to find you a lender perfect for your needs.
If you want a suburban and rural home, you should ask your broker about a USDA loan today.
What Is A USDA Loan?
USDA loans are mortgages available to borrowers seeking rural and suburban property. These helpful loans are issued through what is called the USDA Rural Development Guaranteed Housing Loan Program.
This program is run by the United States Department of Agriculture.
Although many people use USDA loans to purchase new homes, these loans can also be used to upgrade property. USDA loans are offered at reduced interest rates and down payments, making them a top choice for many low-income borrowers.
Types of USDA Loans
As of now, there are three primary types of USDA loans. These offerings range from loans backed by the USDA to those directly offered by the USDA. All of these USDA loans are suitable for lower-income borrowers with homes in a certain geographical location.
The three USDA loan types include:
Loan guarantees: These are mortgages issued by area lenders and backed by the USDA. They typically permit borrowers to get reduced interest rates, sometimes with no down payment. Borrowers who do not make down payments will, however, need to pay private mortgage insurance (PMI).
Direct loans: These loans come right from the USDA, as their name suggests. They are suitable for borrowers who have very limited resources and income. The cut-offs for these income and resource amounts vary depending upon where you live. Interest rates can also become highly reduced.
Home improvement loans: Some of these ‘loans’ aren’t even true loans. Rather, they are financial packages awarded based on a borrower’s need. These home improvement loans and grants are used strictly for fixing and/or renovating homes. Borrowers may receive up to tens of thousands of dollars in assistance.
All of these USDA loan types are based on your various economic and financial factors. They are also only approved once you have shown that you meet all specific criteria. In some cases, your area and market may make you ineligible. Occasionally, requirements may vary significantly.
How to Qualify for USDA Loans?
In case you’re wondering, you can only qualify for USDA loans if you are the owner and primary resident of the home. In other words, these loans are not issued for secondary properties that you barely use. When applying, you must meet various income limits.
These limits vary based on the number of residents in your home. USDA loan borrowers range from people with moderate incomes to people with very low incomes.
USDA Loan Eligibility Criteria
Before you apply for a USDA loan for a suburban or rural home, consult with your broker. A seasoned broker can explain any problems you may encounter. Furthermore, your loan broker can help you obtain the financial information needed to prove you qualify.
You will also need other documentation to show that you are a dependable, trustworthy borrower.
Necessary information includes:
- Proof of U.S. citizenship/permanent residency
- A monthly mortgage payment that is 29% or less of your monthly income. This payment includes your principal, interest, insurance and taxes.
- A debt-to-income (DTI) ratio of 41% or less. This value includes other debts as well, such as credit card bills, student loans, and more. If your credit score is above 680, you may be permitted to have a higher DTI.
- A dependable income lasting at least two years
- A solid credit history. Applicants with scores of 640 or higher may be approved more quickly. Applicants with lower scores may have to provide additional proof of financial stability and credit trustworthiness.
Overall, there are many ways in which you can receive USDA loans for your rural or suburban homes. Applicants with the greatest need typically receive USDA loans more readily. These individuals and families should meet the following criteria:
- Lack access to “decent, safe and sanitary housing”
- Cannot get approved for traditional home loans
- Have adjusted incomes at or below low-income limits for their areas
For smaller homes, the USDA may issue many of its loans directly. This issuance also depends on the market value of the home compared to the area’s loan limits. In some pricey home areas, borrowers may be able to get loans as high as half a million dollars in value. Other rural areas may cut off the loans at $100,000.
Again, it all varies. For the most part, you cannot receive USDA loans in metropolitan areas. Many suburban districts may not be eligible. Rural areas, by contrast, are typically always eligible.
If you are at all unsure about your eligibility, or the USDA loan process, contact a top broker near you. At Latitude Financial we have the home mortgage USDA loan experience you need. Give our experts a call today.
