What is a USDA Loan?
A USDA loan is a special type of mortgage backed by the United States Department of Agriculture (USDA) designed to help people buy homes in rural areas. It’s a great option for those who might not qualify for traditional loans due to income or location.
Who qualifies for a USDA loan?
To qualify for a USDA loan, you must meet certain criteria. Your household income cannot exceed the USDA guidelines, and the property you're interested in buying must be located in a designated rural area. Additionally, you must be a U.S. citizen or permanent resident alien who cannot secure credit on reasonable terms without USDA guarantee.
Can I Use a USDA Loan for a Refinance?
No, USDA loans are only for purchasing homes, not for refinancing. If you currently have a USDA loan, you may not refinance it with another USDA loan. However, you may be able to explore other refinancing options.
What Are the Benefits of a USDA Loan?
One of the main benefits of a USDA loan is that it allows you to finance up to 102% of the appraised value of the home, which means you can potentially cover closing costs and other fees without a down payment. Additionally, USDA loans typically offer competitive interest rates and flexible credit requirements.
What Are the Eligibility Requirements for a USDA Loan?
To be eligible for a USDA loan, your household income must meet USDA guidelines, and the property you want to buy must be located in a designated rural area. You also need to receive an "Approve/Eligible" status from the Guaranteed Underwriting System (GUS) during the underwriting process.
What Documentation Do I Need for a USDA Loan?
You'll need to provide various documents, including proof of income for all household members, employment history, and asset information. Make sure all credit documents are within 120 days of the note date, and be prepared to meet any other requirements outlined by your lender.
Can I Finance Closing Costs with a USDA Loan?
Yes, you may be able to finance closing costs and prepaids into your loan amount if there is enough room in the appraised value over the purchase price. This can help alleviate some of the upfront costs associated with buying a home.
Can I Own Other Properties with a USDA Loan?
You can only own one other home that is not within your local commuting area or is uninhabitable. This restriction is in place to ensure that USDA loans are used for primary residences in rural areas.
If you have any further questions feel free to reach out to one of our mortgage specialist for further information or refer to USDA.gov website for all guidelines and restrictions.