USDA Loans Can Help You Get The Home Of Your Dreams
USDA Guaranteed home loans are attractive because they offer great rates with no down payment.
One of the biggest challenges to purchasing a new home is making sure that you have the cash on hand that you need to provide a down payment on your new home. The down payment typically equals up to 10% of the total sale price of the home!
This is an enormous amount of money for most people, and you also have to take into account the fact that you will need to pay 2% to 4% of the sale price on top of that for closing costs.
When it comes to the USDA Guaranteed home loan, however, you have options that can make the whole process easier and make your new home much more affordable.
A USDA home loan offers you the opportunity to buy a home without putting any money down. Instead, the amount that would typically go to the down payment is financed in your loan.
What about the closing costs? Closing costs are still a factor when you use a USDA home loan, but you have a great deal of flexibility when it comes to them, too. You will usually be able to finance your closing costs so that you don't put any money down out of pocket.
Any difference between the appraised value of the home and the sale value of the home that works out in your favor can be put toward the closing costs. What if there is no difference? You have the option of negotiating the closing costs with the seller to achieve your goals.
The USDA home loan program provides a wide variety of different helpful features just like this to make purchasing easier. When you work with a team of experts like ours, you have a chance to make use of this easy government program and get the best rates possible for you.
What does it all mean in the long run?
- You may be able to purchase the home you want without putting any money down
- If you have money set aside, then you can use it to pay down the principal of the loan
- The amount that you finance is covered by a highly competitive interest rate
- If rates change in the future, you can easily refinance your USDA home loan
The USDA home loan program is very attractive for anyone who wishes to buy a home in a qualified rural area and who do not have the money to pay 10% of the value out of pocket.
Even other federal programs, such as the FHA home loan program, require some kind of down payment. With the USDA program, one of the most challenging parts of the process is easily taken care of.
The major difference between any federal government home loan program and comparable private programs is the fact that the federal government guarantees these mortgage loans.
Even if the borrower becomes incapacitated or unable to pay for the home for other reasons, the lender will not lose a significant amount of the money that it risked when taking on the loan.
This also benefits the borrower, since the lender has more leeway to help the borrower in the case of temporary financial hardships or other issues that might otherwise cause the mortgage to no longer be considered current.
All of this together means that lenders are able to take action on USDA loans and offer them to a very wide spectrum of people in the community. Thanks to the USDA loan program, you:
- Do not need to have perfect credit to qualify, with 640 considered a good score
- Do not need to be able to put down a down payment, and can even finance closing costs
- Do not need to worry about a complex adjustable mortgage rate and get 30 years to repay
The USDA home mortgage program is a fixed rate program that does not offer any kind of 'surprises' when it comes to your rate. Your payments remain consistent throughout the mortgage period and may even go down.
You already know that the USDA home loan program provides you with great benefits if you are buying a home in a rural area. Once you have one, however, what about refinancing?
If mortgage rates change in the future and you have the chance to lock in a better rate, then you can always go forward with a fast, easy USDA Streamline Refinancing loan for your new home.
A Streamlined Refinance USDA loan provides you with a very fast way to lock in new rates without having to submit more documentation. However, there is also a non-streamlined USDA refinance option.
The non-streamlined refinance will allow you to refinance your home and also any lending fees and other costs that might be associated with generating the new loan. That's not the case with USDA Streamlined Refinancing.
The type of USDA home loan that you have and whether or not you still qualify for a USDA loan under the USDA guidelines will influence whether you need to use a Streamlined or non-streamlined loan option, and whether or not the home needs to be inspected or appraised.
What are the major benefits of the USDA home loan for purchasing a home? They include:
- Excellent interest rates that are required to be competitive when compared to private loans
- The ability to go forward with purchasing a home without having to put any money down
- The chance to finance closing costs so that you don't need to spend anything out of pocket
- The opportunity to negotiate very significant concessions with the seller of the property
A USDA home loan is also a very stable option that will provide you with great peace of mind. You have 30 years to repay your loan and payments will usually remain the same throughout.
Although the USDA loan program is guaranteed by the federal government, the loans are offered by private lenders who work according to the USDA standards. That means you need the help of experts in order to get the best rates for your loan.
Once you have qualified for the loan and you know that your property is qualified, then you can refinance at any time that doing so will allow you to save money or provide for lower payments.
The program is limited to single-family homes that are safe and sanitary, although additional funds might be provided in order to make necessary improvements to a home. All homes must be in a qualified rural community. In addition:
- The borrower must not exceed certain basic income requirements
- The borrower should typically have a credit score of 581 or more
- The borrower must have steady income and the ability to repay
Although the program is not limited to first time home buyers, additional tax credits equal to up to 10% of the home value may be available. This can also be used to pay your closing costs.
How does the USDA Loan Guarantee work?
The loan guarantee is an aspect of the loan that makes it more attractive for lenders. If the borrower defaults, the federal government will pay about 90% of the loan value, and about 85% of the value that exceeds 35% of the original loan.
What are the key advantages of the program?
USDA loans offer competitive rates and no down payment. The only limit to how much you may borrow is based on your own income and home prices in the local area. It's possible to finance closing costs and to get significant concessions from the seller.
What kinds of loans are these?
All USDA loans are 30 year fixed rate loans that can be refinanced as needed.
Is a down payment required?
No down payment is required, and closing costs can usually be refinanced, too.
What credit score do I need?
Borrowers typically have a credit score above 581, with 620 or higher considered ideal. However, there is no 'hard and fast' credit cutoff. As long as you have demonstrated a clear pattern of recent responsible financial behavior, you may qualify.
What properties can be purchased?
Owner-occupied properties in rural areas that are single family homes, new manufactured homes, qualified condos, or townhomes can be eligible for the program.
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