First-time homebuyers may feel intimidated by the high price tags most properties have when house hunting. Luckily, the United States Department of Agriculture offers a great program to introduce homeownership with ease.
The USDA loan, also known as the rural development loan, was made to help any American attain ownership. This can be favorable if they aren’t qualified to apply for other home loans or financing programs. Continue reading to learn a few more perks about acquiring a USDA loan.
The USDA Loan was made to achieve a higher population in rural areas. A rural area is defined as any location or community with less than 35,000 people. That makes an overwhelming majority of the United States eligible to get a USDA loan.
We also have to consider that the USDA loan was made for low-income applicants. The USDA loan can be helpful for those who cannot apply for other mortgages. New and growing families will also benefit from getting this loan.
Zero Down Payment
What sets the USDA loan apart from other mortgages is how the down payment goes. Most loans will require a substantial down payment to ensure capital on the lenders’ part. The USDA loan requires no down payment at all.
The USDA loan is funded by the US Government and is one of the few remaining mortgage options with zero down payment. There are flexible mortgage programs and VA loans available too as an alternative.
Favorable Mortgage Insurance
Aside from the lack of down payment, the USDA loan doesn’t require borrowers to pay private mortgage insurance. Instead, the USDA charges an annual fee with the mortgage payment you pay monthly. There’s also an upfront guarantee fee when you finish and close the loan.
The USDA loan has the lowest funding fee from the US Government’s line of loan products. Along with that, the loan is available at a common fixed-rate. These mortgage terms often span 10-30 years.
Good Interest Rates
Regular financing often has considerably high interest rates that can discourage first-time homebuyers. Meanwhile, the USDA loan allows borrowers to get low-interest rates from lenders. There can be some variation in the percentage depending on location, current market conditions, and credit profile.
No Minimum Credit Score
Compared to other loans, the USDA loan requires no minimum credit score. It must be acknowledged that a credit score of 640 and above can bring more benefits. You can achieve streamlined processing and a more optimal position in the underwriting system with a good credit score.
Owning Additional Property
This perk is a little more applicable to homebuyers who already have existing properties. Homeowners who are seeking to find an extra house are eligible for applying for a USDA loan. The only catch is that one person and property is entitled to a sole USDA loan; if you’re hoping to have your new house financed by a USDA loan, your previous property should have a different mortgage.
Homebuyers can achieve the house of their dreams in a cozy country community with the help of the USDA loan. There are more specified requirements an applicant has to review and go through. When in doubt, consulting with a loan professional can definitely help.
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