USDA Loans
Buying a home is an expensive investment. Across the US, the median sale price for a house is over $430,000. Depending on the market, it could cost more or less. Conventional loans are the most popular mortgage product in the housing market but are not always accessible to prospective buyers.
USDA loans are a type of mortgage product that is more accessible and affordable than the average conventional loan. Suppose you are moving to an eligible property in a rural or suburban area. In that case, you can secure a USDA loan and take advantage of low down payments, looser credit score requirements, and more competitive interest rates.
TrueWay Mortgage is an experienced lender that can help you finance your dream home through the USDA mortgage process. We specialize in finding custom solutions for every borrower, including the USDA loan program. We offer competitive terms to make homeownership more affordable for eligible buyers.
What is a USDA Loan?
USDA stands for the United States Department of Agriculture. This branch of government backs mortgage loan programs designed for rural and suburban homebuyers. Since the government backs these products, USDA-approved lenders can lower their qualification standards so more borrowers can afford homeownership.
A USDA mortgage may be available through payment assistance programs. Borrowers who meet the median income requirements often enjoy lower USDA mortgage rates, a lower annual fee, and flexible loan limits. The home must be the borrowers primary residence and be located in eligible rural areas.
TrueWay Mortgage can offer these products to eligible borrowers as a USDA-approved lender. If the house you want is located in a designated suburban or rural area, and you meet the other eligibility requirements. In that case, you can apply for this loan and reap the benefits of the USDA housing loan program. As a trusted lender, we will provide honest guidance and a simplified process to make your dream of homeownership more accessible.
How Do USDA Loans Work?
When lenders assess borrowers' credentials, they consider numerous elements, such as income, credit scores, debt, down payments, cash assets, and more. The lender will reject their application if a borrower is deemed too risky for a conventional loan based on these metrics. USDA loan requirements are more flexible, making this an option for very low income homeowenrs
USDA loans compare favorably to conventional loans for low-income borrowers if the properties are in eligible rural areas. There is often a lower annual fee. USDA loan requirements involve a lower credit score, but homeowners must meet specific income guidelines for very low income homeowners. A USDA eligibility map can help borrowers find rural areas in which to buy a home.
Understanding the USDA loan program can take time and effort, especially for a first-time homebuyer. The TrueWay Mortgage team is committed to helping you learn about USDA loans and determine if they are the solution you need to buy a home. We offer the best USDA mortgage rates and can help you fill out a USDA loan application.
Benefits of Choosing a USDA Loan
The USDA home loan program is an excellent alternative for financing if you cannot qualify for a conventional loan. This product's key benefits include a zero down payment, competitive interest rates, and lower monthly mortgage insurance premiums. Let’s discuss these benefits to help you understand why a USDA home loan may be right for your needs.
No Down Payment Requirement
If you purchase a home through traditional financing, you must pay a certain amount upfront for the price of the home. Conventional lenders typically have a minimum down payment requirement of 3% of the cost of the home. For a $200,000 house, you must pay at least $6,000 upfront, which doesn’t include closing costs.
You can take advantage of a zero down payment with a USDA loan. That means all you must pay regarding an upfront funding fee is the closing costs for the home, and you can often find assistance programs to help with those. Although a zero down payment means a larger loan balance, it significantly lowers the barrier to entry for homeownership in rural America.
TrueWay Mortgage can help you take advantage of this zero-down payment feature. We can discuss your budget together to determine whether a low down payment on a USDA loan is the key to securing your next home. We offer USDA loans to help you enjoy the benefits of homeownership.
Competitive Interest Rates
One of the factors that will affect a loan’s affordability most is the interest rate. Interest is the cost of borrowing the money you need to pay for the home. You sign a contract with the lender to repay the principal amount plus interest over time. If the loan’s interest rate increases, your monthly payments and total loan amount will increase. Conventional financing often involves higher interest rates.
USDA home loan programs for an eligible rural area offer more competitive rates, and you don’t have to pay a massive upfront fee. A lower interest rate means your monthly payment and total loan amount will be smaller. This makes purchasing a home more affordable for homeowners who meet the USDA guidelines for income eligibility.
If you are interested in securing a better interest rate on a home loan, TrueWay Mortgage can offer you a USDA loan that will cost less over time. We can discuss fixed rate loans, explain loan terms, and help you determine if you qualify for USDA home loans.
Low Monthly Mortgage Insurance
When applying for a conventional home loan, borrowers are recommended to pay at least 20% of the home’s sale price upfront. This is the number required to avoid paying private mortgage insurance. A smaller down payment is riskier for the lender, so they compensate by charging an annual insurance rate in monthly premiums.
If you apply for a USDA loan and choose a low down payment or zero down payment, your mortgage insurance premiums are also lower. This is another benefit of the program that makes homeownership more realistic for borrowers with less income or a smaller down payment.
Lowering monthly payments is one of the keys to making a home more affordable. With our USDA loans, you can focus on savings when buying a house. TrueWay Mortgage will help you understand this type of insurance and how to take advantage of cheaper premiums with USDA loans.
USDA Loan Eligibility Requirements
Although these loans are more affordable for low-to-moderate-income families, they are not guaranteed loans. Borrowers must still meet the eligibility criteria for USDA lenders to qualify for the mortgage. These requirements include property location, income limits, and credit score standards. TrueWay Mortgage aims to help clients understand these criteria and how to meet them when applying for USDA rural development loans.
Property Eligibility for USDA Loans
The focus of these government-backed loans is suburban and rural development. Therefore, borrowers can only purchase properties in eligible locations with USDA-guaranteed loans or direct loans. If you are looking at a property in an urban area or a certain suburban region, it may not be eligible for a USDA loan.
You can run a basic search on a specific address to determine if it is available for USDA financing. Check out the property eligibility map to see if the home you are interested in is in a designated rural or suburban zone. If you are uncertain about the status of a particular property, TrueWay Mortgage can help you understand the USDA eligibility requirements.
Credit Score Requirements
Lastly, your credit history will affect your ability to acquire USDA direct loans. Most lenders want to see a credit score of 620 or greater, but there may be exceptions based on your other finances. For example, the lender may accept a slightly lower credit score if you have a larger down payment or a favorable debt-to-income ratio.
Before you apply for a mortgage, TrueWay Mortgage can discuss your credit score concerns. Whether you are worried about qualifying or need help raising your score before buying a home, our experienced team can offer helpful guidance.
Income Limits and Requirements
Although USDA loans may appeal to every borrower looking at a rural or suburban home location, they are only available to some. There are income limits that control who can apply for a USDA loan. These mortgages are designed for buyers with less income, so there is a maximum income requirement based on the poverty level of the buyer.
To qualify for a USDA loan, the borrower’s household income cannot exceed this limit. The standard limit for a household with one to four people is $112,450, which will vary widely by location. The standard income limit for a household of five to eight people is $148,450. These limits ensure the loans are kept available only for certain borrowers.
Technically, the USDA has not listed a minimum income requirement to qualify for the USDA program. The government leaves this decision up to each USDA lender. Generally, a participating lender will have a set income minimum to qualify for a loan and a maximum debt-to-income ratio. The highest DTI ratio may be roughly 41%, but that can change from lender to lender.
Types of USDA Loans
USDA financing is available in multiple formats. The two primary types of mortgages are USDA direct loans and guaranteed loans. A USDA direct loan is the less common of the two and is only available to very low-income borrowers.
Applications for a single-family housing direct loan are processed through local rural development service centers rather than lenders. TrueWay Mortgage can help you decide which loan is better suited for your needs.
USDA Guaranteed Loan
The more common product is the single-family housing guaranteed loan program. You apply for this type of loan through individual lenders. This loan program offers 100% financing to borrowers with moderate incomes or less. The lender determines the interest rate based on the market rate and certain USDA limitations.
TrueWay Mortgage has plenty of experience helping clients secure guaranteed home loans. Together, we will help you understand the benefits of this program and how it can make your dreams of homeownership come true.
Contact Sam and Anisha Mauldin
TrueWay Mortgage
Start Your USDA Loan Journey with TrueWay Mortgage
Affordability and accessibility are necessary for people to become homeowners. With conventional financing, many prospective buyers are discouraged from making this investment because of high down payments, high interest rates, and lofty credit score requirements.
TrueWay Mortgage can support your goal of homeownership by helping you secure a USDA loan for a rural or suburban property.
Call us today at 404-962-0032 for a free USDA loan consultation.