Clarifications on USDA Loans You Need to Know About - Video
USDA loans are a great option for any homebuyer who has a low to moderate-income and/or doesn’t have the ability to put 20% down. In fact, with a USDA loan you can put as much as 0% down on your new home, but there’s a catch.
USDA Loan Video for Greater Charlotte NC Area
With a USDA loan, there are some unique requirements. While both USDA and Conventional loans require a credit score of at least 620 they also differ in a few ways. Even though you can use a Conventional loan to purchase a house for any reason. If you use a USDA loan you need to be prepared to make that home your permanent residence. This is needed because the USDA developed its program to “assist approved lenders in providing low- and moderate-income households the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas.”
Another key difference between USDA and Conventional loans is location constraints. A USDA loan can only be used for properties in an eligible zip code or area. Whereas a conventional loan can be used anywhere. You can easily check the USDA website to see if your next home is in an eligible area.
The next requirement a borrower has to satisfy in order to be approved for a USDA loan is income eligibility. You must be able to prove that your household’s earnings are below a certain amount. The specific income eligibility changes between areas.
Depending on the region a USDA loan limits how much you’re able to borrow. This limit is based on the market in the surrounding area. So more expensive markets like California or Hawaii will have different loan limits than parts of rural America.
Finally, you will need mortgage insurance. Your first premium can be financed into the loan amount and is an upfront payment of about 1% of your total mortgage. The second is an annual mortgage insurance premium, which is .35% of the loan and paid in twelve monthly installments along with your mortgage payment.
USDA Loans are a great option for anyone with low to moderate-income in rural areas and are one of the only options that allow you to pay 0% down. With the USDA loan program, thousands of families have been able to find safe and affordable housing. If you’re interested in learning more about how you can find a USDA home click the link here.
Guest Author - Geoffrey Archer of OnQFinancial.com