If you are looking to buy a home in a lower income area, you may consider applying for a USDA loan. These loans are designed to help eligible borrowers make homeownership a reality, and offer low rates and no down payment.

How to USDA Loans work?The main goal of USDA Rural Development is to provide housing in rural areas and for lower-income families. As a result, the program sets maximum household income limits for borrowers. This is called the “adjusted annual income” (AAI). Income is based on the total projected income of all adults living in the home. To determine an accurate view of available income, lenders generally request two years of tax returns.

The USDA offers a popular programs like Section 502 direct loans, and Section 502 guaranteed loans. Applicants must demonstrate that they can make the payments on the loan, as well as plan to use the home as their primary residence. They must also have an income below the income limits established by the USDA.

How do USDA Loans work?

While the USDA is a federal agency, many of the requirements for the loan are handled by private lenders. Lenders’ internal guidelines may be more strict than those of the government. For example, some lenders may require applicants to have at least 640 credit scores. On the other hand, applicants without a credit history can qualify with alternative forms of proof. Some examples include rental payment records and utility bills.

There is no minimum credit score requirement for a USDA loan. However, if you have a score of less than 620, you will be required to undergo a manual underwriting process. Generally, lenders will ask for recent paystubs, a two-year history of rent or mortgage payments, and other forms of credit verification.

Unlike FHA loans, USDA home loans do not require a down payment. The amount of the loan can be as little as $20,000. Moreover, the interest rate is guaranteed by the US Department of Agriculture for the life of the loan. It is also lower than conventional mortgage rates.

Buying a home is an investment in your future. Whether you’re a first-time homebuyer or are simply upgrading to a larger home, it can be a big financial commitment. That’s why it’s important to find the right loan for you. A USDA loan is a good option for many people. Those with a moderate income who are looking for a more affordable mortgage can also benefit from these loans.

Purchasing a home is one of the biggest investments you will ever make. But it can be difficult to make the down payment needed for a new home. Fortunately, the USDA provides a path to homeownership for qualifying rural borrowers. Whether you’re a first-time buyer, a current homeowner, or are in the market for a bigger, more expensive home, the USDA can help you achieve your dream of owning a home.

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