Just because you live in the rural area does not mean you cannot quality to take out a mortgage loan. Just like VA and FHA, the US Department of Agriculture provides low income earners an option to take out a mortgage through its Rural Development Program. The USDA home loans are designed to allow low income earners to purchase property in rural areas. According to onqfinancial.com/home-loans/usda-home-loans/, although they offer similar benefits of a VA loan, USDA home loans have some limitations and challenges. Here are some things you need to know about these mortgage loans.
Is Your Property Eligible?
To qualify for a USDA Rural Housing Loan, your property needs to meet certain guidelines. First of all, your home should be located in designated rural areas considered qualified for financing by the US Department of Agriculture. You can check it with your real estate agent or the USDA Property Eligibility Map. If you are unsure whether a property you are considering is qualified for financing, check it anyway. onqfinancial.com/home-loans/usda-home-loans/ reveal that most of the time, eligible homes are still located within close proximity of large cities.
Are You Qualified?
As for your qualification as a borrower, the loan officer will take a look at several factors such as your credit score and history, status and history of employment, current debt, income, and amount of equity in the home you plan to purchase.
Is Your Income Qualified?
USDA home loans are governed by income caps that restrict participation of borrowers at or below a particular income threshold. At present, the income cap is up to 115 percent of the area median income adjusted for family size. In contrast, there is no maximum loanable amount on USDA loans. The amount you can borrow will depend on your income, debt, and other factors.
What About Insurance Rates?
Similar with FHA loans, USDA home loans have their own form of mortgage insurance, both upfront and annual. In most mortgage loans, the current upfront fee is 1 percent of the loan amount. So a $250,000 loan would have an upfront fee of $2,500 to be added to the balance of the loan. For the annual fee, rhe current rate is 0.35 percent of the loan balance. On the same $250,000 loan, the annual fee to be collected will be $883 or $73 a month.
Because the mortgage is guaranteed by the US Department of Agriculture, there is room for more flexibility in the interest rates. With the guarantee, the lender is protected from losses should the borrower default on the loan.
Credit Score Requirement
The good news is that with the USDA Rural Development Program, there is no benchmark for credit scores. It is the lender who will set the minimum credit score requirement. However, the common cutoff is a minimum 640 FICO score.
