If it’s your goal to be a part of the American dream and get into homeownership, this is a competitive year to do it. Homes are selling fast and for higher prices than ever before.
You might wonder if achieving this goal is doable for you. Interest rates are at an all-time low, yet the number of homebuyers is at an all-time high. Is it possible to get financed as a new homebuyer?
You might have heard of the government’s program called USDA loans. You might also hear it’s for first-time buyers who buy only rural land. It might surprise you to learn that many more properties qualify for a USDA loan than you might expect.
Once you know about the many benefits of a USDA loan, you might be ready to take another look at this opinion to purchase a home. Let’s learn more about USDA loans and how they can benefit you.
What is a USDA Home Loan?
A USDA loan is one offered by the US government’s Department of Agriculture. They allow a homebuyer to buy a home with a low-interest, zero-down-payment home loan.
The USDA loan was initially intended to get first-time homebuyers to move into more rural areas. It started in 1935 with the intention to motivate possible city dwellers to consider moving out to rural areas of the country.
Because the loans are backed by the government and are in some ways intended for homebuyers who might have a harder time getting financing otherwise, there are a few restrictions to be aware of with the USDA loan. More on these shortly.
Benefits of a USDA Loan
There are a few benefits to consider when considering a USDA loan.
First, you don’t have to have perfect credit to get a USDA loan. In fact, a lower credit score won’t automatically make you ineligible at all.
Another benefit for you as a homebuyer is you don’t have to have any down payment. You read correctly; a USDA loan allows buyers to put down zero for a down payment. Of course, this can also impact your mortgage payment.
Typically, when a homebuyer doesn’t put down a 20% down payment, they also pay PMI insurance. This insurance protects the lender in case the home buyer defaults on the loan. With a USDA loan, you have a small percentage of PMI because the government backs this loan.
A USDA loan also allows you to get a mortgage with a lower interest rate than many other government-backed loans, like an FHA loan, for example.
The USDA loans can also be extended.
Debunking Myths of the USDA Loan
Most people who initially hear about a USDA loan assume they won’t be eligible because it’s for buying homes in rural areas. In fact, 97% of US land is eligible for a USDA loan. You actually can buy a home in the suburbs and still get a USDA loan. They will look at the area population and your income for qualifying.
Another common misconception with the USDA loan is that you need to be a first-time homebuyer. This also isn’t true. You can be making a home purchase a second or third time and still qualify for this type of loan.
Getting into a Rural Area Home with USDA Loans
There are a host of benefits to consider from a USDA loan that can help many potential homebuyers actually make that American dream a reality.
For more information about USDA loans and to see if it’s the right mortgage fit for you, contact us today.