Wondering how to qualify for a USDA loan? The United States Department of Agriculture (USDA) offers low-interest, government-backed loans for financing rural homes and businesses. These loans are for people in rural areas — that is, generally more than 50 miles from a major city — and whose incomes don’t exceed 115 percent of the median income in their area. Check the USDA eligibility map If you’re not sure whether you qualify for a USDA loan-
What are the qualifications for a USDA loan?
You can borrow up to $240,000 with a USDA loan. The requirements for this loan depend on how much you wish to borrow. If you borrow less than $100,000, you will need a 640 credit score, at least 3.5% down payment, and a maximum debt-to-income ratio of 43%. If you borrow more than $100,000, your loan amount could increase to as much as $1,200,000.
Review Your Property Tax Record
Make sure you have not paid a property tax bill in the last five years. The average person owns 100 houses around the country within their lifetime, and the average effective property tax rate is around 3%.
If you own 12 or more properties, say every single one you own is a home, you will likely face some headaches if you choose the more expensive option. The vast majority of people choose to pay their property taxes annually and plan to update their homes every few years to address new issues, such as outdated HVAC or roofing. Those with very few properties may successfully pay their property taxes for many years by interviewing different real estate agents for the best deal. Investing in real estate, whether residential or commercial, is about educating yourself and learning your local market and resources.
Who can apply for a USDA loan?
A USDA home loan can help you buy a home in rural America. It’s for first-time homebuyers who are U.S. citizens or permanent residents. And if you’re a first-time homebuyer, you can get a loan with just a 3.5% down payment.
USDA loan requirement– – The buyer and property determine whether the buyer is eligible for USDA financing. A USDA-qualified “rural” area is defined by a population of less than 20,000. In addition, USDA monthly income limits must be met by the buyer. A maximum income of 15% over the local median is needed to be eligible. A primary residence must also be utilized by the buyer (no investment properties or vacation homes).
What are the things to consider when deciding whether or not you should get a USDA loan?
The USDA loan program offers a variety of benefits, including low interest rates and low down payments. Many homebuyers opt for USDA loans over other types of loans, but there are a few things to consider when deciding whether or not to get a USDA loan. The following are the top three things to consider when deciding whether or not to get a USDA loan.
Benefits of USDA Loans
For rural homebuyers, a USDA loan allows them access to funds for newly constructed and substantially renovated single-family properties and small multi-unit properties up to 100 acres. But there are also other benefits, too. Check them out.
USDA Loans Make Property Affordable
USDA loans aren’t as widely available as traditional FHA loans, but they tend to be more affordable than comparable conventional liens, which start at about 7 percent. While interest rates on conventional loans can be higher than on a USDA loan, they’ll usually be much lower than the rates on FHA loans or 4 percent conventional home equity loans. And you won’t need to pay private mortgage insurance, either.
According to Freddie Mac, the average six-month fixed-rate loan costs just 3.34 percent of the purchase price. The average 4.5 percent conventional loan costs 3.86 percent of the purchase price. Compare that to 12.96 percent on a USDA loan.
Add to that the fact that the loan amount itself is less restrictive than student debt, which can start at thousands of dollars per semester. For example, you might qualify for a $500,000 loan, and the loan amount is only 15 percent of your purchase price. But amortization is less than three years on a loan of this size — and you could have only five loans of that size. An unsubsidized loan would cost as much as you pay in mortgage insurance!
Reasonable Institutional Lender Standards
Because USDA loans generally aren’t as accessible as traditional payday loans or FHA loans, you may be able to qualify for a USDA loan with fewer lenders. But for the good part, PierPoint Mortgage can be your trusted lender in that matter.
How do I qualify for a USDA loan?
The USDA loan is a government-backed loan program. The USDA loan program is designed for rural homebuyers who are unable to qualify for a conventional mortgage because their property is not located in an urbanized area. To qualify for a USDA loan, you must be working through a USDA-approved lender.
If you have questions about how to qualify for a USDA loan, contact an experienced lending professional like PierPoint Mortgage for help getting started. We are always available to assist you and provide you with the right guidance and support when you apply for USDA loan.