When the time comes for you to buy a house, you’ll likely need a mortgage. Typically, homeowners go to the banks for traditional loans that are not insured by the federal government. There are also first-time homebuyer loans to help make the process more affordable.
Another loan to look at that has many benefits is the USDA loan (USDA Rural Development Guaranteed Housing Loan Program). The loan came to be through the U.S. Department of Agriculture mortgage program. The issue, though, is that not many people know about this loan or how they can benefit from it.
Consider the following five points about the USDA loan to learn more.
One of the more difficult aspects of getting a mortgage is that interest rates fluctuate across different lenders. The quote you get from one mortgage broker could be significantly higher than someone else. It can be difficult to determine what is really the lowest interest rate possible according to the current market.
The USDA loan tends to have some of lowest interest rates across the country, which is a huge benefit when you start paying your mortgage every month. You can use a USDA loan calculatordesigned specifically for a USDA loan.
No Money Down
Another popular aspect about the USDA loan is that you are not required to have a down payment when getting a mortgage. For some families, the down payment can be too much to handle up front, even though they would be able to handle the monthly mortgage payments.
It’s Not Just for Farmers
Since the U.S. Department of Agriculture created the USDA loan, it’s common for people to think that this loan is only for farmers. However, that isn’t the case.
The USDA loan is for all residential properties, primarily in rural and suburban zones. Although some small to mid-sized cities are eligible for the USDA loan, it is mainly for rural settings. So, don’t think you need to be a farmer to access this loan.
There is an Income Limit
Just because you’re looking at a house in a rural area, that does not mean you automatically qualify for the USDA loan. The Agriculture department created this loan to help assist low-to-moderate income households. The average income limits are as followed:
- Households with one to four members: $82,700
- Households with five to eight members: $109,150
When applying for the loan, the income limitations take into consideration the total household income, not just an individual. If you have other family members living with you that have an income (even grandparents with pension counts), that will factor into the total household income.
Other Eligibility Requirements
Where you’re looking and how much your household makes are not the only requirements. Additional requirements for the USDA loan include:
- Proof that you’re a U.S. citizen or is your permanent resident.
- The potential home will be your permanent residence.
- You must have a stable and verifiable income.
- The potential property must be in good condition.
- Your debt-to-income ratio is acceptable, meaning you have enough of an income to continue to pay your debt and mortgage.