What is an USDA loan?
USDA loan eligibility
Types of USDA loans
USDA Guaranteed loans
These loans are provided under Section 502 of the Housing Act of 1949 and are issued by USDA-approved lenders and guaranteed by the agency in case borrowers default. This is perhaps the most common USDA loan you’ll find most lenders offer. In order to qualify, a borrower’s income can’t exceed 115% of the median income for their area.
Direct issue loans
These loans also are provided under Section 502 of the Housing Act of 1949. They are issued directly by the USDA, rather than through intermediary lenders. To qualify for a USDA loan, a borrower’s income can’t exceed 50% to 80% of the median income in their area.
Home improvement loans
Home improvement loans are issued under Section 504 of the Housing Act. These are a combination of loans and grants that can provide borrowers with up to $27,500 ($20,000 as a loan; $7,500 in grants). The loan portion is repaid over 20 years at 1% interest. To qualify, applicants must have a household income below 50% of the median income for their area.
The USDA loan mortgage insurance
USDA requires a one-time mortgage insurance premium of 1% of the base loan at closing (this can be rolled into the mortgage) and a yearly mortgage insurance of 0.35% paid monthly through your monthly payments. This mortgage insurance is required for the life of the loan, regardless if the borrower puts a down payment or not.
Applying for an USDA loan
The process for securing a USDA loan is very similar to any other mortgage option. However, there are a few extra steps required for getting a USDA loan to confirm eligibility. If you are looking to apply for a USDA loan, these are some steps you can take to get ahead of the curve:
Check if the property is in a qualifiable area
The process for securing a USDA loan is very similar to any other mortgage option. However, there are a few extra steps required for getting a USDA loan to confirm eligibility. If you are looking to apply for a USDA loan, these are some steps you can take to get ahead of the curve.
Check your income eligibility
Your income will play a role in determining whether or not you qualify for a loan. Keep in mind that the USDA counts the total household income, regardless if other people in your household will be on the loan or not. You can get an idea about income eligibility based on your area by clicking here
Pick a mortgage broker or lender that works with USDA loans
The USDA does not originate loans directly therefore, borrowers have to go to a lender or a broker that does. As mortgage brokers experienced in USDA home loans, Andes Mortgage, LLC., works with different lenders that may be able to suit your needs. We invite you to chat with us to obtain all the information you need and ensure that you can qualify for this financing option. Click here to check your USDA eligibility and talk to us.
USDA loan vs a conventional loan
One of the biggest benefits of the USDA home loans is the 0% down payment feature, whereas Conventional mortgages require at least a 3% down. Also, USDA in some cases, offer below-market rates compared to conventional loans. However, conventional loans do not have a maximum income limit, area requirements as they can be used anywhere, and are able to finance vacation and investment homes. USDA loans are specifically for primary homes only.