People who have heard of USDA loans may have written them off as inappropriate for their needs. Most people likely, and reasonably so, assume that these loans are aimed at those who want to purchase acreage and a farm house with the intention of farming. For those who need a home loan and have little-to-no funds for a down payment, however, the USDA offers potential buyers with an unbeatable, and little known, option for buying a home. To learn more about the USDA Section 502 Direct Loan and the Guaranteed Loan program, read on.
No Down Payment Required
The Section 502 program will make qualifying buyers a loan with an astonishing 0% down payment. Only the Veterans Administration offers consumers such a deal on a mortgage loan. To qualify for the 502 program, your income must be classified as low to very low. Since the income figures are based on median incomes in individual areas of the country, your location determines the maximum income allowed.
10% Down Payment Required
If your income exceeds the requirements for the 502 program, you might still be able to get a relatively low down payment loan by utilizing the USDA's Guaranteed Loan Program. This program allows those with low to medium incomes to qualify for a loan with a 10% down payment.
While USDA loans don't have to be for a farm, the qualifying areas tend to be in relatively rural areas. These loans are actually aimed at getting consumers interested in locating outside of heavily populated urban areas. That being said, you may be surprised at what the USDA classifies as "rural". Many suburban towns outside of larger cities fall into the allowed area, as well as large swathes of land in most states. The USDA makes it easy to see if your potential dream home falls into a qualifying area by providing maps where you can simply plug in your address to view the (qualifying) non-shaded areas.
Both of these USDA loan programs are guaranteed by the U.S. government. The term "guarantee" can be somewhat misleading, however. The "guarantee", in this instance, refers to the guarantee of payment to the lending institution. For example, if you default (don't pay) a USDA government-guaranteed loan, the government will actually step in and pay the loan for you. This means that the lender has less to lose by making the loan, which could increase your chances of qualifying for a home mortgage.
Be sure to discuss the valuable opportunity that a USDA loan presents with your mortgage lender and get into your dream home for sale today.