USDA loans are zero-down-payment mortgages for rural and suburban homebuyers and they are typically for borrowers who can’t afford a traditional mortgage.
If you feel more at home out in the country, you may be able to achieve this dream of living out in the country thanks to the U.S. Department of Agriculture mortgage program. The USDA loan is arguably the government’s least-known mortgage assistance program.
A USDA home loan is a zero down payment mortgage for eligible rural and suburban homebuyer. These loans are issued through the USDA loan program, which is also called the USDA Rural Development Guaranteed Housing Loan Program, by the U.S. Department of Agriculture.
How do these loans work?
There are three different USDA home loan programs: loan guarantees, direct loans, and home improvement loans and grants.
Loan Guarantees: This means the USDA guarantees a mortgage issued by a participating local lender. This is similar to an FHA loan and VA-backed loans. This allows you to get low mortgage interest rates, even without a down payment. However, if you put little to no money down, you will have to pay mortgage insurance.
Direct Loans: These are issued by the USDA, and are mortgages for incredibly low-income applicants. Income thresholds vary by region and interest rates can be as low as 1%.
Home Improvement Loans & Grants: These loans or grants allow homeowners to repair or upgrade their homes.
How to Qualify
Income limits to qualify for a home loan guarantee vary by location and depend on household size. USDA home loans can fund only owner-occupied primary residences. Other eligibility requirements are:
- U.S. Citizen or permanent residency
- A monthly payment. Including principal, interest, insurance, and taxes.
- Dependable income, typically for a minimum of 24 months
- Acceptable credit history, with no accounts converted to collections within the last 12 months.
People with a credit score of 620 or higher will have a streamlined process. However, if you are below 580 you will face a tougher time.
