Advantages of USDA Loans Tips, Rural Development Loan Advice, US Financial Guide
Advantages of USDA Loans
Oct 9 + 1, 2020
Whether its Texas USDA loans or any other rural USDA loan, there is no doubt that USDA loans are beneficial. USDA Home loan. USDA loans (also referred to as Rural Development Loan) is a government instituted loan scheme that enables Americans to purchase a home of their own with no down payment. It offers 100% financial assistance to qualified candidates.
Three factors determine USDA loan eligibility; they include:
- Credit Worthiness: Here, an underwriter reviews your credit report to determine your worth. Attention will be paid to your credit history, debt history, and history of bill payment, amongst others.
- Income Level: When applying for USDA loans, applicants are required to provide their income statements. Usually, USDA officials will want to see at least a two-year employment history. Income eligibility for USDA loans is determined by income and the number of dependents.
- Area of Property Location: It is not enough to choose any property that catches your fancy as there are guidelines. First, the home must be located in a designated rural community where the total population is not more than 35,000 people.
Also, the property must be used as a primary residence and not for commercial use. Hence, while you are expected to reside in the home permanently, you cannot use it for things like barns, farms, and other business ventures.
To determine if your home is qualified for a loan, visit the official website, or consult an expert. You will be shocked to know that many counties are qualified for these loans. That’s to say that while the term ‘rural’ is used to describe low-income communities, rural does not necessarily mean an uncivilized, bushy area.
In fact, according to USDA Texas, many counties are qualified as most of the population is within the range of 35,000 people; hence 97% of American homes are eligible for USDA loans.
USDA’s objective is simple; it aims to help smaller, developing communities develop and thrive by making homeownership as attractive as possible.
Benefits of USDA Loans
Asides the mortgage rates USDA being lovely, this loan program does not require down payments. But beyond that, there are other advantages. Here is the overview:
- The government approves USDA loans under the United States Department of Agriculture
- Lots of rural properties to choose from
- Offers 100% financing
- There are no USDA loan income limits
- There are no restrictions on seller concessions
- Mortgage rates are relatively low
- Has a low monthly loan insurance
- The only appraisal approved are those by FHA/USDA
- Manufactured homes can also qualify for USDA loans
- The 1% guarantee fee paid can be added into the loan
- Gives up to 30% value with restrictions
Disadvantages of USDA Loans
While there are numerous advantages to the USDA loan program, there are still some disadvantages, and we will be revealing them all to you as this will give you an insight of what you are heading into: These disadvantages include:
- Not applicable to non-U. S citizens
- It is selective: it does not apply to the rich
- Must be located in a rural area
- Cannot be used for commercial purposes
Now let’s take a look at the requirements for qualification:
- Location: As earlier stated, rural homes are those located in underdeveloped communities. Hence, applicants must ensure the house they hope to purchase is located in a rural or suburban area. Also, you can check the eligibility of the home on the USDA official website.
- Income: Since this loan program aims to reach lower-income earners and ensure the loan gets to the right people, some requirements have been put in place.
First, applicants will need to provide evidence of having a stable income. Also, there are USDA income limits. They differ from one county to the other. However, in general, a small household of 1 to 4 persons have an income limit of $90,300, while families with 5 to 8 persons have an income limit of $119, 000.
Also, the applicant’s household’s total income must not exceed 115% of the gross median income of the region.
- Credit Score: Having a high credit score is the secret to low-interest rates and quick loan processing. The credit score should be as high as 620, but if lower, then it’s okay, it only means the process will be slower and more stringent rules applied.
- Property: The property to bought must be in good condition with all features working as they should. They are sole to be used as a primary residence and not for a temporary arrangement.
USDA loans are quite beneficial; it gives the low-income earners a sense of belonging as now they can have a house of their own. You too can be a part of it, ensure your records are intact, then go ahead and apply. You will be glad you did.
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