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What is a USDA loan?

The United States Department of Agriculture (USDA) has developed a group of financing programs to “give families and individuals the opportunity to buy, build, repair, or own safe and affordable homes located in rural America.” These loans are available to low and moderate income families at very favorable terms.

What are the requirements to get a USDA loan?

  • Only some lenders can issue these loans – USDA direct loans can only be issued by the local Rural Development office directly to the borrower. USDA guaranteed loans are issued by approved lenders.
  • Only certain properties can qualify – USDA loans are for rural areas only; additional restrictions apply, for example the home must be modestly sized and cannot have certain features like an in-ground pool.
  • Only some borrowers can qualify – eligibility is based on income, and limits are determined regionally. If you make too much money compared to the median income where you live, you may not qualify for a
    USDA loan. Different loan types are available to borrowers at different income levels.
  • Only owner-occupants can apply – USDA loans are intended to help families achieve homeownership. These loans will usually only be issued when the borrower intends to use the property as their principle
    residence.
  • Loans can be used to buy, build, refinance, or repair a rural home. Loans may be available for multi-family residences where each family finances their unit individually with the entire complex financed under the same program.

If you qualify…

  • USDA loan interest rates are extremely competitive, and can be as low as 1%.
  • Longer repayment periods mean a lower monthly payment – borrowers can get a 33 year or in some cases a 38 year loan.
  • The down payment is determined by available assets, and some borrowers may be able to get a USDA loan with no down payment.
  • You may be able to borrow more than the purchase price in order to make necessary repairs, certain improvements and even appliances. Additionally, these loans can be used for “special design features
    or permanently installed equipment to accommodate a household member who has a physical disability.”
 

How to qualify…

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