Five important things you need to know about USDA loans
- Posted: June 26, 2019
- By: Nations Lending
If you’re looking for mortgage loan types other than conventional loans, you may want to consider a USDA loan, as they have many benefits.
USDA loans (short for the USDA Rural Development Guaranteed Housing Loan Program), offered by Nations Lending, are mortgage loans provided by the United States Department of Agriculture.
Designed to support development in rural areas, USDA loans have a number of qualities that make them attractive to homebuyers:
1. USDA loans are not just for farmers.
If you’re like many people, the terms “USDA” and “rural” might immediately conjure up images of farms and rows of crops. However, the USDA loan program is for residential properties, not income-generating farms.
While the home you would like to purchase must be in a rural area as defined by the USDA, this will often include suburban areas as well, and many home buyers will be surprised to see that even homes in some mid-sized cities are sometimes eligible. Find out if a property is USDA loan eligible .
2. USDA loans do not require a down payment.
If you opt for a USDA loan, you can finance 100% of the purchase price, so you don’t need a down payment.
3. Mortgage insurance is required, but affordable.
One of the downsides of a loan that doesn’t require 20% down, such as an FHA loan, is PMI. PMI can add hundreds to your monthly payment. USDA loans also require mortgage insurance to keep the program in operation: a 2% upfront fee required at closing and a .40% annual fee of the principal. You can roll the 2% into your loan amount, so your additional monthly payment is just .4% of your balance.
4. USDA loans cover a wide range of property types.
Many types of properties are eligible for a USDA mortgage, including:
• Existing homes
• Manufactured homes
• New construction
• Condominiums
• Modular homes
• Planned Unit Developments (PUDs)
5. USDA loans have income limits.
Because the USDA loan program is designed to make owning a home affordable for rural families, your income must fall within these limits to be eligible in most areas in the U.S.:
• 1-4 family members: $82,700
• 5-8 family members: $109,150
In some areas where the cost of living might exceed the national average, income limits are adjusted to reflect that.
Is a USDA loan right for you?
If you’re in the market for a new loan, a USDA loan might just be the perfect option for you and your family. To find out more about USDA loan requirements, contact a personal mortgage advisor at Nations Lending toll-free today at 1-877-816-1220.
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