Affordable Home Financing with USDA
Even with tightened budgets, thousands of Americans are still hoping to obtain their dream of homeownership. However, instead of purchasing large homes with conventional mortgages, many are choosing to downsize and finance their homes with a government backed loan. Of the three most popular government backed lending programs, the USDA Home Loan program is rising in popularity because it not only makes homeownership more affordable, but also more accessible to those who otherwise wouldn’t have any other financing options.
What Exactly is a USDA Loan?
Traditionally seen as the farmer’s loan, the USDA loan actually provides a variety of lending options to families seeking rural living. However, just because USDA loans were created to support rural living, doesn’t mean that you have to move far away to benefit from the program. Many of the areas deemed by the USDA as rural are actually on the outskirts of major metropolitan areas, or in developing areas of larger cities.
Why Choose a USDA Loan over Conventional?
Conventional lending options have notoriously high out-of-pocket expenses. To simply secure financing, most borrowers have to put a 20 percent down payment. For an inexpensive home purchase of $125,000, that’s a down payment of $25,000 – an expense most can’t afford, especially in this economy. However, with a USDA home loan, interested homebuyers avoid many high out-of-pocket expenses, and are able to obtain benefits such as:
- No needed down payment
- No needed mortgage insurance
- Competitive interests rates
- Flexible loan terms
Are USDA Loans Only for Single Family Housing?
To better provide families with affordable housing, the USDA also has a variety of housing assistance programs. A few of the other USDA housing programs include:
- Mutual Self Help Loan
This loan is designed for very low to low income households achieve financing needed to build their own homes. Families work together to build each others’ homes. - Rural Rental Housing Loan
This loan is for very low to moderate income households, and was created to provide affordable multi-family housing.
The loans provided by USDA can also be used for the purchase of land needed to build a safe home, renovations needed to community facilities, and to expand businesses.
Who is Eligible for a USDA Loan?
The USDA home loan program has some of the most lenient eligibility requirements out of all the government backed lending programs. In order to be eligible for financing, most of the
loans simply require that you purchase property in a USDA Designated Area and are able to make monthly mortgage payments.
Although the USDA Loan Program has no credit requirements itself, lenders who are USDA-approved will generally desire a credit score of at least 620 to approved financing. If you are interested in a USDA home loan, or another type of USDA loan, constant your local Rural Development office.
This article was written by Kevin Pearia, Content Director for USDALoans.com