Conventional Mortgage Alternative – USDA Loan

Conventional Mortgage Alternative – USDA Loan

Depending on where you plan to move, there may be additional mortgage options you can look at. Many are used to going to the bank for the conventional mortgage when buying a house. However, that doesn’t have to be the case.

One type of mortgage to consider is a USDA loan. Although there are stipulations behind the loan that you must meet, if you are eligible, this loan could make many houses more affordable for low-income families.

What is a USDA Loan?

Starting in 2017, the USDA Rural Development Guaranteed Housing Loan Program came to be by the United States Department of Agriculture. The single-family program is there to assist very low-to-moderate-income households who are searching for a home or repair their primary residence. The purpose of this loan is to make housing more affordable for those who struggle.

If you get approved for a USDA loan, you do not need a down payment, which makes this program excellent for first-time home buyers. It is a 100 percent financing mortgage.

Unlike conventional mortgages that have strict eligibility requirements, a USDA loan is a bit more lenient on who can access this program. The most stringent guidelines though are with the area of the property and the size of the family using it.

What are the Requirements for a USDA Loan?

One of the main requirements to access the USDA loan program revolves around the location of the property. The program is intended for houses in rural and suburban areas of the United States.

Although the United States Department of Agriculture backs the USDA program, this does not mean you have to be living on a farm. You would be surprised that many areas in the country count as a suburb, which opens up more housing options for someone using this program.

There are income limits that depend on the size of the family. It takes into account everyone age 18 or older who contributed to the household income. The total household income must be under 115 percent of the country’s median income.

Other requirements include being a United States citizen or it being your permanent residency. The applicant must have a reasonable credit history. Also, monthly debt cannot be over 41 percent of your income.

The Benefits of a USDA Loan

One of the main benefits of a USDA loan is why it began – needing no down payment and 100 percent housing financing, the USDA loan makes homes affordable for many Americans.

Going with a USDA loan, you have a better chance of locking in lower interest rates than conventional mortgages. The interest rate does not come from your credit score or down payment. It is a set interest rate for all USDA loans.

Even though the USDA loan program asks for you to have a reasonable credit history, even if you have blemishes on it, you could still get approved for this program. The guidelines allow you to prove if a blemish was due to uncontrollable circumstances, and include other payments if your credit history isn’t long enough.

To get even more benefits of a USDA loan, visit United Fidelity Funding for more information.