What Is a usda home loan?
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USDA Home Loans – What You Need To Know
In case you’re wondering what is a USDA home loan, it’s the U.S. Department of Agriculture’s initiative to make it easier for families to own houses. Launched in 2014, the goal is to provide loans to low-income families who want to purchase a home, using as much as possible of their own funds.
USDA loans come with terms and conditions that are favorable to the borrower, which means they can be good for your wallet. Also, be aware that these loans are non-traditional, which means you may need to show proof of earnings or savings higher than what is typically required.
Why A USDA Home Loan?
As a rural family loan officer at a commercial bank, I can tell you that there are numerous benefits to a USDA home loan. Here are just a few:
- Interest rates are generally lower than what you’ll see for similar home loans from a traditional lender.
- Application fees are waived for most borrowers.
- Mortgage insurance is optional for most borrowers.
- No private mortgage insurance required for USDA loans.
- There are fewer paperwork requirements.
- There’s more flexibility when it comes to using a car for collateral.
- And voila — no more need to sign liability waivers when cosigning a loan.
How Do I Qualify For A USDA Home Loan?
To qualify for a USDA home loan, you need to meet the following criteria:
- You must be a U.S. citizen or legal resident
- You must apply online
- You must be able to document at least three months of adequate payroll (either through employment or self-employment, excluding tips)
- You must be able to establish yourself as a farmer (on a family farm or operated as a business)
- You must submit a completed application by February 15th of the year you’d like to make the loan payment (exceptions can be made if you’re on a hardship, such as a job loss)
- You must submit official documentation of all three of the following: income, savings, and assets (a car is worth about 10% of your income, for example)
What Is The Best Way To Make A Loan Payment?
The best way to make a loan payment is by electronically transferring it to the lender’s bank account. To do this, you’ll need to have a checking account and an automated payment system. A few large banks and credit unions also allow for loan payments to be made via text message on a mobile device. This can be convenient for both parties involved, as it saves them both the time and effort involved in a regular bank visit.
Texting a payment can be done by entering the account number and payment amount to be transferred into the text field on the screen. If you’re making a payment by check, bring it to the bank in person (do not mail it). Most banks offer full service centers near or at their locations, so it’s not necessary for you to drive all the way back from work just to make a payment on your house.
If you’re wondering where to obtain the paperwork needed to make a home loan — from a bank or government agency — visit this useful page, which leads you to the USDA website. There, you’ll find all the forms you need, including the application, a lease, and (if you choose) a property disclosure statement.
USDA loans are relatively simple to obtain, but before you begin the process, be sure to familiarize yourself with the loan requirements, such as the income documentation needed to qualify and how much you’ll need to make each month to ensure you’re making the right choice for your situation.
The US Department of Agriculture (USDA) has a new role in America’s rural communities: the loan officer. Since last year, the USDA has been issuing loans to help purchase farmland and starting-up businesses. While the opportunities seem endless, there are factors that you should consider before applying.
The biggest draw of the USDA loans is that they are 100% guaranteed, which means that the government will cover any debt for college students or first-time farmers. This is in contrast to other types of loans, like a personal loan or a business loan, which typically have higher requirements for loan forgiveness.
This guarantee is attractive to investors, who see the low risk of investing in a rural community as an opportunity to make money. The USDA also offers a variety of loans with different terms and fixed rates, so no matter which kind of investor you may be trying to appeal to, you can find a loan that suits your needs perfectly. The Department of Agriculture guarantees all debt for aspiring farmers and ranchers, and for those seeking business ownership, the low credit rating of their local area makes it easier for them to obtain financing through the Rural Business Program.
If you are curious about applying for a USDA loan, check out this helpful guide from the department to get started. Additionally, if you’d like to learn more about the loan program, go to ruralbusiness.gov and click on loan and financial management tools to be directed to the USDA website. There you can find all the information you need to know about this opportunity or others offered by the agency.
If you’re thinking about getting a home loan from the USDA, here’s what you’ll need to know.
The first thing the USDA will want to know about is your finances. Does your income meet your needs? Do you have enough cash to make the down payment and monthly payments? Are you willing and able to make these payments on time? All these questions factor into whether or not you’ll be approved for a USDA home loan.
Family and friends
You’ll need to have some family and friends who are willing to pitch in with a down payment. The USDA won’t generally fund a home purchase solely based on income, so having some savings is important. Getting a home loan from the USDA means you’ll have to make sure you’re credit-worthy, however, so don’t expect your friends and family to save up for your down payment. They’ll need to see you’re able to afford the monthly payments as well.
Real estate appraisal
When you make an offer on a home to purchase, the seller will generally offer to do a real estate appraisal. An appraisal is an independent evaluation of a property’s value. In the event of a dispute, the appraisal will be admissible in court. You’ll need to get the appraisal done by a certified appraiser and bring a copy with you to the loan office when you make an application.
Before making an offer on a home, the seller will generally do a home inspection. During the inspection, the professional inspector will examine the house for structural soundness and compliance with local building codes. You’ll need to schedule an appointment for the inspection. If you have a certified inspector do the inspection for you, that’ll save you both time and money. The inspector will then prepare a report and give it to you prior to the closing.
Hopefully, this was helpful. Now that you have an idea of what you’ll need to apply for a USDA home loan, you can start looking for a mortgage lender. Good luck!