Blog | USDA Home Loan Program

Top 6 Reasons you’ll Love the USDA Home Loan

Qualifying for a mortgage isn’t like it was in the “good old days” of the early to mid 2000′s. There are a number of reasons potential home buyers seem unable to buy their dream homes. It could be because they don’t have a large enough down payment or that they don’t have a credit score. Good news, the Federal Government is here to help. It’s called the USDA Guaranteed Home Loan. Here are 6 things to know and love about the program.

1. A True 100% No Money Down Loan

The USDA home loan program requires no down payment and you may finance up to 102% of the appraised value. Since the end of down payment assistance programs in 2008, the USDA home loan program is one of the only remaining 100% loan programs.

2. There are no Limits as to the Amount You Can Borrow

The USDA Home Loan program will finance what you can afford to pay. Unlike conventional loans which are insured by Freddy Mack or Fannie May, there are no official loan limits. The amount of the loan will be directly related to your ability to repay the loan.

3. No Mortgage Insurance

The USDA home loan program requires no up front or monthly mortgage insurance; saving you hundreds of dollars each month. With FHA loans, you have both an up front mortgage insurance premium and a monthly mortgage insurance payment.

4. No Credit Score Required

Unlike most home loans, the USDA Home Loan does not require a credit score. Instead, borrowers can use things such as rental history, insurance payments or utility bills to verify their credit worthiness. Check the USDA Home Loan credit guidelines to learn more.

5. Seller Concessions Allowed

The USDA Home Loan program, there are no rules regarding closing costs and who pays what portions. Some loans limit the seller concessions, but under this program the negotiations are not controlled.

6. The Rural Areas Are Not Necessarily That Rural

The USDA Home Loan is guaranteed by the United States Department of Agriculture. People may wrongly assume that this loan is meant for farmers or ranchers. No, many homes in smaller cities as well as those in outlying suburbs of metropolitan areas are also eligible. Check your USDA Home Loan eligibility or contact a USDA Home Loan approved lender to see if your property qualifies.

There you have it, 6 important reasons the USDA Home Loan should be considered when purchasing a home. Lenders must be approved to offer these loans. Find a USDA Home Loan lender and start the house hunting today.

Your Home Loan Interest Rate

One of the most important aspects of the home loan is the interest rate, how it is calculated, and how it applies to the loan repayment plan. When you begin the process of applying for a home loan, you will need to consider which loan will be right for you, based on its interest rate type. If you do not understand the different types of home loans, here is information on the three major types that you may encounter. This way, you will be able to choose the one that is right for you.

The Fixed Rate Loan. By far, this is the most common choice. (If you have a loan insured by the USDA home loan program, your only option is a fixed rate mortgage.) Usually for a term of either fifteen or thirty years, the interest rate for this loan is locked in at the time that the buyer is approved. This interest rate will not change throughout the whole term of the mortgage.

Many people choose the fixed rate loan because they will not have to worry about their mortgage changing, and they will be able to budget accordingly. Generally, for a home loan that does not require a down payment, the fixed rate loan is chosen as well since it can offer the lower interest rate.

If interest rates are low when you apply for your loan, the fixed rate variety will offer you the best value, and you can count on your loan payment staying the same year after year.

The Adjustable Rate Mortgage. This one is often called ARM, and it is basically opposite from the fixed rate loan. With an ARM loan, the interest rate will change, based on the prime interest rate for the country.

Many people choose an ARM loan if the interest rate is particularly high when they apply. They are calculating that the interest rate will go down in the future and their payment will drop as well.

The negative aspect of the ARM loan is that the payment can vary year by year, and if the prime interest rates go up, the mortgage payment could go up drastically as well.

The Balloon Payment Mortgage. This type may sound really good, but if you plan on keeping the house for the length of the loan, it could pose a problem. With this type of loan, the borrower will pay a very small amount for the whole length. This amount could be just the interest due on the house.

If you keep the loan for the whole term, at the end, you will be required to pay a large balloon payment. This could be the whole principle of the home. Balloon payments can be feasible if you do not plan on keeping the home for very long.

As you can see, these three loan types serve different purposes. You will need to consider carefully which is right for you.