When shopping for a new home, there are many types of mortgages to choose from. One of the lesser-known types of mortgage loans is a USDA loan, which is a zero-down-payment mortgage for rural and suburban homebuyers. USDA loans are issued through the USDA Rural Development Guaranteed Housing Loan Program by the U.S. Department of Agriculture.
About the USDA Loan Program
There are two types of USDA home loan programs available:
Loan Guarantees
You can apply for a USDA mortgage through a participating local lender like First Independent Bank. This type of loan is similar to an FHA or VA loan. It allows you the opportunity to get a mortgage with a low-interest rate, even without a down payment.
Direct Loans
This type of loan is issued directly by the USDA and is typically for low and very-low-income applicants. Interest rates for direct loans can be as low as 1%.
Benefits of a USDA Mortgage Loan
- USDA mortgage loans typically offer the lowest interest rates available.
- USDA mortgage loans require no down payment.
Who is Eligible for a USDA Loan?
Eligibility for a USDA loan is determined based on the buyer and the property. A steady job and income are required (though there is an income cap), a credit score of 640 is usually required, and your debt-to-income ratio should be 41% or less in most cases.
From a property standpoint, the home you are buying needs to be in a rural or suburban area, typically with less than a population of 20,000 people. Click here to see if a property is USDA loan eligible. And to learn more about eligibility and the opportunities of a USDA loan, click here.
If you are interested in learning more about USDA loans, please feel free to contact our mortgage team. They would love to help you!