If you’re considering getting a USDA loan, it’s very important that you pay close attention to what you need to provide so you can have the best chance at being approved. The USDA loan qualifications aren’t identical to those of other loans, but there are some similarities. The best option is to find a local lender who’s comfortable with USDA loans and used to offering them, so you can ask about the specific qualifications in your case. There are a lot of myths surrounding what you need to do for a USDA loan and what kind of property you can buy, so it’s a good idea to get your questions cleared up before you decide if it’s the right loan for you. Don’t buy into the myths, though. There are plenty of good reasons to use the USDA loan for your next property.
1). Can you buy property anywhere?
When you’re trying to qualify for a USDA loan, you can’t buy property just anywhere. This loan is from the United States Department of Agriculture, which wants to you live rurally for them to finance you. If you’d rather live in an urban or suburban environment, this isn’t the loan for you. There are plenty of other options for getting financed in those circumstances, but if you want a rural lifestyle this could be your loan.
2). Do you need to live on a farm?
In getting a loan for a home it’s important for the lender to understand what type of property you want to buy. However, you don’t need to live on a farm to get a USDA loan. It’s true that you need to live in a more rural setting, but what you do with the land that comes with your house is up to you. You can farm it if that’s your plan, or you can simply appreciate the peace and quiet that comes from not having neighbors right next door to you. Many people prefer that, and use a USDA loan to make it happen.
3). What if you don’t have a down payment?
Some USDA loans don’t require any kind of down payment at all. There are no down payment and low down payment programs, giving buyers plenty of different options. That’s great news for people who are just starting out, and also excellent news for people who just have trouble saving up enough to put much down on a property. They can have some choices, and the opportunity to get a loan that will work for them and won’t require them to provide 10 or even 20 percent of the home’s purchase price as a down payment.
4). Can anyone qualify?
Many people can qualify for a USDA loan, but there are some requirements that have to be met. The location of the property is one of the biggest hurdles, because it has to be acceptable to the USDA for their loan program. If it’s not you can’t get a loan through them, no matter what kind of down payment you have or how good your credit is. There are also minimum credit score requirements and you’ll need enough income to be able to pay your mortgage in addition to any debts you already have.
5). How good does your credit have to be?
If you’re buying a house with a mortgage your credit will matter. That’s just the way it is for any loan. You don’t need perfect credit, though. The minimum score for the USDA is 620. For rural property and some other locations, you may want to consider a USDA loan. Even if your credit isn’t amazing, many people can get their score up past the minimum requirement. That won’t guarantee that you’ll be approved, but it’s a start. You definitely won’t be approved with a score lower than that, so working to raise your score a bit before you apply can be one of the ways to strengthen your application.
6). Are there price and location limitations?
The USDA handles conforming loans, and they generally work with buyers who have a lower level of income. That’s not to say they’ll turn down a buyer with more income, but they just don’t see them as often. They also generally don’t handle jumbo loans, because the vast majority of their buyers are people of modest means who are looking for inexpensive, rural property. There are also many location limits. The property must be rural, and it must be in an area that is serviced and accepted by the USDA. If you want this type of loan, it’s better to find out the area and then go look in that area specifically, instead of looking at houses and then trying to see if they’ll be accepted.
7). How long do you have to pay the loan back?
The USDA loan is a 30-year mortgage, just like conventional, FHA, and VA options. You can pay your loan off earlier, but you won’t have to. That helps to keep the payments low for borrowers, so they don’t end up in trouble with their mortgage payments and their finances. While a USDA loan isn’t for everyone, it can be a perfect choice for a low to moderate income borrower who is looking to live a more rural lifestyle and wants to get a loan with a good interest rate and a small to nonexistent down payment.
2 Point Highlight
For rural property and some other locations, you may want to consider a USDA loan.
If you’re considering getting a USDA loan, it’s very important that you pay close attention to what you need to provide so you can have the best chance at being approved.
