If you are looking to buy a home in a rural area in your state you may be eligible for a 100% financing, no money down from the The U.S. Department of Agriculture. This loan is called a USDA loan, or a Guaranteed USDA Rural Home Loan.
You can use this mortgage program to purchase a new home, build a home, buy an existing home, or buy a home that needs to rehabilitation. To be sure if this loan is right for you, you may want to know the benefits of the USDA loan.
Benefits of a USDA Loan
The USDA loan is available for no money down. You do not have to put any money down which means you can get a mortgage for the sales price of the home that you negotiate.
Better yet, the seller can also help with some or all of your closing costs without restriction.
You can get gift money or grant money and down payment assistance to help pay purchase the home which can reduce the amount that you have to finance.
Lower monthly payments
Because the USDA loan is guaranteed by the US government, mortgage lenders are often inclined to offer better than market interest rates. Also, in some cases, there are local and state incentives to purchase homes in rural areas which include lower than market interest rates.
Given that you can get gift, grant, seller help and down payment assistance your monthly payment may be lower than if you would get a comparable mortgage from FHA and Fannie Mae.
The USDA loan can be for as long as 38 years versus the standard 30 years. With this extra time, the required monthly mortgage payment can be significantly lower at 38 years than at 30 years.
No mortgage insurance. This is a great benefit of the USDA loan. If you were to get an FHA, conventional Fannie Mae or Freddie Mac mortgage you will have to pay PMI or Private mortgage insurance if you put less than 20% down on your home purchase. Actually with FHA, you will have PMI regardless of how much you put down when you start the mortgage.
Flexible Credit Requirements
Similar to FHA loans and VA loans, the USDA loan requirements allow for less than perfect credit and alternative forms of credit. Technically, there is no minimum credit score required for a USDA loan like there are for Fannie Mae and Freddie Mac conventional mortgages. For conventional mortgages you will need at least a 660 to have a shot at qualifying for these programs.
If you have had credit problems in the past, as long as you have corrected your situation and your last 12 months of credit history have been on track, you have a shot at qualifying for a USDA loan. If you do not have much credit on your credit report, USDA allows for alternative forms of credit to used – like a rent payment, phone bill, and utility bill – to qualify your credit.
With these outstanding benefits for the USDA rural home loan program the USDA loan program is a wonderful loan option for home buyers seeking to buy a home "in the country". If this sounds like you, find out if you are eligible by taking 2 minutes and applying on this site for a free quote.