How does this sound? You can buy a home and skip the down payment requirement.
With a USDA home loan, homebuyers can do just that. It’s one of a handful of surprises home applicants enjoy when they pursue homeownership with USDA financing.
It might also come as a surprise that you do not have to be a farmer to qualify for a USDA loan.
If you’re thinking about buying a home, read on to learn more about how USDA loan funding works and all of the program’s advantages.
Down payment unnecessary
Homebuyers who apply for USDA loans can move forward with zero down. This might be news to you — and you’re not alone.
One of the more popular lending programs that doesn’t require a down payment is the VA loan. So, many homebuyers assume that they are not eligible for a lending program that doesn’t require a down payment unless they’re servicemembers.
So, if you welcome rural living, then this is a major lending perk to take advantage of.
Flexible income requirements
Buying a home is more expensive today than just a few months ago for various reasons. Rising home prices and increases to interest rates are some of the forces homebuyers must contend with.
The good news for USDA borrowers is that the lending program is income based. Moderate earners will qualify and benefit from the flexible requirements and money-saving loan program features.
Rural living redefined
You don’t need to be a farmer or find a home in a remote location to qualify for this loan.
Many applicants are pleasantly astonished that the definition of rural as it applies toward eligibility doesn’t match up with their assumptions. To see if your desired area is eligible, visit the U.S. Department of Agriculture website.
Affordable mortgage insurance rates
Most lending programs require mortgage insurance unless the homebuyer chipped away 20% of the home’s cost through a down payment.
Even through an FHA loan, borrowers will need to add private mortgage insurance. With a USDA loan, homeowners will instead pay for the guarantee fee, a combination of an upfront fee and an annual payment. Together, they will be less than what you’d expect to pay when you have private mortgage insurance with other loan options.
As home prices increase, USDA loan applicants can breathe easier with the program’s not-so-strict loan limits.
As a result, loan applicants can purchase a home that aligns with their budget without worrying about exceeding borrowing limits. Lending caps are not uncommon in other lending programs.
Now that you know a little more about the USDA loan, it might be worth your time to explore the possibilities and see if you’re eligible. If you are, you’ll enjoy some amazing money-saving perks and other program benefits as a new homeowner.
PMR is not affiliated with or an agency of the federal government. All opinions expressed by the loan officer, are the loan officer’s opinions, and do not reflect the opinions of PMR.