Almost everyone wants to own a property they can call their own. If you are one of those, you may be considering a USDA loan to turn your dream into a reality. The U.S. Department of Agriculture backs this type of loan. It allows those living in low-to-moderate income households to purchase a house in a rural or suburban area with minimal investment and no down payment. Before you apply, determine if this option is the best one for you by using this article as your guide.
What Are the Types of USDA Home Loans?
USDA home loans allow you to buy a home with 100 percent financing and low rates. They come in different types: loan guarantees, direct loans, and home improvement loans and grants.
Loan guarantees allow borrowers to benefit from a low down payment and low mortgage interest rates. Meanwhile, direct loans have interest rates as low as one percent, while home improvement loans and grants loan up to 27,500 dollars to homeowners wanting to repair or upgrade their homes.
Am I Eligible for a USDA Home Loan?
To qualify for a USDA home loan, you need to meet income and credit eligibility requirements. Fortunately, being eligible for this type of loan is more accessible than other loan types because it does not require you to have a high credit score or a down payment. You just have to make sure you are looking at properties within USDA-eligible geographic areas because the property location is its most important factor.
What Are the Benefits of USDA Home Loans?
As a borrower and aspiring homeowner, you want to make sure you get your money’s worth before applying for a loan. Here are the benefits you can expect if you secure a USDA home loan:
- The USDA Guarantee. This type of loan is guaranteed by the U.S. government, specifically by the U.S. Department of Agriculture. It means if you default on your loan, USDA will reimburse your lender. In other words, the USDA backing eliminates much of the risk from the loan, letting mortgage companies and banks offer zero down payment and low-interest rates.
- Zero Down Payment. The most beneficial feature of the USDA loan is you are not required to make a down payment. It also allows for 100 percent financing of a purchase price of an eligible house. Therefore, you can avoid paying thousands of dollars to upfront expenses.
- The USDA Guarantee Fee. Among other types of loans, the USDA mortgage insurance fees are among the lowest. As a borrower, you can pay the upfront fee out-of-pocket or roll it into the loan amount. This is because the USDA mortgage insurance premium partially funds the lender guarantee.
- Cheaper. Since October 1, 2016, USDA loans have been cheaper than other loans because they reduced their monthly fee from 0.50 percent to 0.35 percent. The upfront fee also got reduced from 2.75 percent to just one percent. In short, this type of loan provides you with an excellent opportunity to get lower monthly payments.
USDA Loans Expert in Phoenix: Desert Springs Mortgage LLC
Being able to afford a home might seem next to impossible, especially if you are part of low- to moderate-income households. The good news is that you can achieve your dream of homeownership by securing a USDA home loan. If you decide to apply, take note of the information mentioned in this guide. Seek help from our mortgage company in Phoenix to become a homeowner. At Desert Springs Mortgage LLC, we run a full-service mortgage brokerage specializing in USDA loans, jumbo loans, FHA loans, and more. Contact us at (623) 432-1309 to learn more about the financing options we offer!