5 Common Questions About USDA Loan Answered

USDA loan with zero down payment benefit is a popular home loan for home buyers with no military service history. Affordable payment plans, low interest rates, 100 percent financing and low-credit eligibility criteria are a few reasons that make USDA home loans a better option than most of the other conventional loans. If you are looking for an easy way to buy a home, put USDA above the other available options. In this post, we cover five common questions that home buyers usually ask before obtaining a USDA loan.

Question 1: What is the qualification criteria for a USDA loan?

The location of the property is the most important qualification criteria. The applicant can obtain a loan for a house that is within the USDA-eligible geographic area. Borrowers making up to 115% of the median income of the area where they want to purchase a home are eligible for the USDA loan. A family of four, for instance, planning to buy a home in Los Angeles area has the annual income limit of $98,200.

Question 2: Is it necessary that the property should be in good condition for USDA loan approval?

The condition of the property is another vital qualification criteria, if you are applying for USDA loan. The property needs to meet the minimum standards to get loan approval. An appraiser inspects the condition of the property to states the same in the appraisal report. The qualification standards are almost the same as for FHA loan.

Question 3: Can I purchase a manufactured home with USDA loan?

The buyers in most cases qualify for a USDA loan if they are purchasing a new manufactured home. There are, however, a few scenarios where the lender might approve USDA home loans for a pre-existing manufactured house. If the current owner of the house already has USDA loan on the property, you might be able to get a nod from the lender.

Question 4: Is there any minimum credit score required for a USDA loan?

Applicants with a credit score of 660 or above usually have the highest chances of getting USDA grants. The score was set to a minimum 640 on December 1, 2014, but it did not affect most of the applicants as many lenders already had the minimum score set at the same level. Borrowers with no traditional credit history are also eligible for USDA loan, provided they show their rental history, insurance payments and utility payment records.

Question 5: What is the term of the USDA loan program?

A guaranteed loan (guaranteed by the third party) earlier had a fixed payment tenure of 30 years, and borrowers were given the option to reduce the tenure to 15 years in September 2014. Direct loan has two repayment options for 33 years and 38 years. If the income of the borrower is above 60 percent of the annual monthly income, the USDA approves a tenure of 33 years. A USDA loan for manufactured home has a loan term of 30 years.

Last Few Words

Backed by the United States Department of Agriculture, USDA loan has several benefits such as low interest rates and zero-percent financing, which make it a more affordable choice over traditional loan options. More than 166,000 families availed the benefits of USDA loan in 2015. Before you apply for a USDA loan in Texas or any other state, make sure to have a thorough understanding of all the eligibility criteria, pros and cons of USDA loans process and payment plans, which makes it easier to qualify for the approval.

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5 Key Benefits of USDA Loans Over Conventional Loans

One of the reasons USDA loans are gaining popularity over conventional loans is that they offer several benefits to borrowers that conventional loans don’t. USDA loans came into existence during the Great Depression when the American economy was going through turbulent times. The purpose of these loans was to provide financial help to individuals and families with low and moderate incomes and help them buy dwellings of their own.  The loans have evolved a lot since then and there are more than a few benefits that they offer to borrowers. In this blog post, we discuss five key benefits of obtaining a USDA loan.

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1. Zero Down-payment

One of the most popular benefits of Texas USDA home loans is that borrowers are not required to make any down-payment. Conventional loan borrowers, on the other hand, are required to pay anywhere between 3.5 to 5 percent as down-payment fee.

2. Zero PMI

Conventional loan borrowers are required to pay a monthly private mortgage insurance (PMI) fee if they put anything less than 20 percent as down payment. As USDA loans require no down payment, they don’t require borrowers to pay a PMI.

3. Easy to Obtain Credit Qualification Criteria

The credit qualification criteria for obtaining USDA loans is far more lenient than that required when applying for a conventional loan. The credit score requirement is 640 for USDA loans. If the applicant’s score is less than 640, they can still apply for a manually underwritten loan.

4. Low Interest Rates

As the USDA home loans in Texas are backed by the US Department of Agriculture, lenders offer them at rates that are comparatively lower than conventional loan rates. The other interest rate benefit that USDA loans offer is that the rates do not vary with the applicant’s credit score, as they do in the case of conventional loans.

5. Closing Costs Benefits

Conventional loans have a closing cost that varies between two to five percent. This is an additional burden for borrowers. USDA loans, however, allow borrowers to roll the closing costs into the loan amount, thereby allowing borrowers to avoid an upfront fee.

Conclusion

Now that you are aware of the benefits that USDA home loans in Texas offer, there is no reason you should not apply when looking for a home loan. To learn more about the pros and cons of USDA loans or initiate the process of applying for a USDA home loan, get in touch with a USDA home loan expert and they will guide you and expedite your home loan application process.

3 USDA Loan Programs You Should Know

For many of us, owning a house is our life’s biggest dream. A common problem that stops us from realizing this dream, however, is the lack of resources. If you live in a rural area and need financial assistance to build a house for your family, the United States Department of Agriculture or USDA mortgage program may just be the right solution. The program helps finance the entire cost of your house, without binding you to the obligation of a down payment. Through this blog post, we have a look at three USDA loan programs that you should know.

1. Single Family Direct Homeownership USDA Loan

The Single Family Direct Homeownership program helps realize applicants, with low and very low income, their dream of building a safe and sanitary house in the eligible rural areas. Also known as the Section 502 Direct Loan Program, it provides you with payments assistance, a type of subsidy to buy, renovate, or repair houses in rural areas. To qualify the household income must be less than 80 percent of the median income of the area and the applicant must not have adequate housing. The potential property shouldn’t be larger than 2,000 square feet or exceed the market value of the total loan limit.

2. Single Family Housing Guaranteed USDA Loan

The Single Family Housing Guaranteed program is for low and moderate income people, who wish to build, improve, rehabilitate or relocate their dwellings in rural areas. The applicant should be a U.S. citizen, a U.S. non-citizen, or a qualified alien, and their income must be less than 115 percent of the median income for the area. In addition, the applicant must be able to afford mortgage payments, and show their interest in meeting the credit obligations on time.

3. Single Family Housing Repair Loans & Grants

The Single Family Housing Repair Loans & Grants or the Section 504 Home Repair program helps applicants, with very low income, improve their homes and make it worth for living. It is a program tailored for elderly people live in sanitary and safe houses in the eligible rural areas. Applicants who are unable to get credit from other sources should only apply for the loan program. In addition, their income should be less than 50 percent of the median income for the area. Qualified applicants can repay the loan in a period of 20 years.

Conclusion

All the above USDA loan programs are there to help people, no matter they live in Texas or any other area, with low to very low income, secure a sanitary and safe house in rural areas. Applicants should, however, analyse the pros and cons of various USDA loans before they decide to chose a particular program. When looking for professional assistance, they must speak to a loan banking officer. These professionals understand the finer lines of the process and can help advice about a loan that would best match your individual needs.