Ask yourself what you know about the USDA home loan process? You think that it’s for those that want to own farms and live in rural communities and do things like that, right? Well, we all thought that at one time or another. However, that is not what these loans are all about. Sure, you cannot get a loan of this nature if you live in a major city or metropolitan area, but if you’re looking to live somewhere outside a city and you meet the very interesting set of requirements, this is a loan option that might work for your family. If you want to buy a home, it’s worth looking into. As it is, there are many families that are unable to use traditional means to purchase a new home. Not everyone has the income capacity to save for a down payment while also paying rent in a home they reside now, and that means the American dream is not always in sight for many.
With the help of a USDA loan, however, many families that might not be able to qualify for a traditional mortgage can still buy a home. We will tell you exactly how you can qualify for a USDA loan so that you and your family can begin looking for a home and living your very own American dream.
What is a USDA Loan?
The first step in understanding the USDA loan is to understand that it is not a traditional loan. You do not go to a bank and apply for this. It’s given to buyers by the United States Department of Agriculture. The program has been around since 1991, and it works to help low and middle income families afford a home. What you have to understand about this is that there are two different types of USDA loans, and that means that you and your family have an even better chance of qualifying for one or the other. The Direct loan program is for those who have low income. It’s designed to offer loans to those who have a household income that is less than 80% of that of the rest of their community. Guaranteed loans are broader in terms of what they have to offer. These are for more families than the direct, and they are offered this way since they are backed by a financial institution.
If you qualify for a direct loan, you need to understand how this loan works and how it will benefit your family. To qualify for a direct loan from the USDA, you will need to make sure that the home you purchase is modest ‘in the area’ in which you are looking to buy. Additionally, you will need to be able to prove there is no in-ground swimming pool and that there is no way that the house can be used for income potential – such as rental property income or whatnot. Loan limits are a lot stricter with this kind of loan since the people buying homes through this program often cannot afford much to begin with. There are many factors that have to be considered with a loan of this nature, and that’s just one of them. The good news about this loans, too, is that they can be used for several things. You can use them to rebuild, build or even move a home – it would have to be a manufactured home, however.
For this loan, you must meet several requirements:
- Not have sanitary housing
- Not qualify for another loan
- Make the property your primary home
These loans are much like the direct loan process, but they have different stipulations. For example, these loans can be used to renovate a home, or to refinance a home. The difference is that the USDA backs this type of loan, which is good for 90% of the value of a home, in case someone should default on their mortgage. This means that those who are in need of a home loan can qualify for this type of loan and still make differences to homes that they already own.
For this loan, you must meet several requirements:
- Meet income requirements
- Make home your primary residence
- Purchase home that meets all criteria
How to Qualify
The USDA website has the information that you need to qualify for a loan of this nature. What you have to do is consider where you live. A big city home is not going to be eligible for either of the USDA loans mentioned here. Additionally, you do not have to live in the middle of absolutely nowhere to qualify. You can live in a rural community near a city and still qualify. You are not delegated to being a farmer in the middle of the country hundreds of miles from the nearest city. You can do far more than that.
You do have to check for income qualifications. It doesn’t matter how much you make in general so much as it matters how much you make and where you make it. If you live in a community in which the average household income is only $50,000 per year and you make $50,000 per year, you’re probably going to have a more difficult time getting a loan like this than someone who makes $60,000 per year in a community in which the average annual household income is $90,000. Those people are considered ‘less well off’ than you based on the income of those who live in their community, even though they make more than you do throughout the year.
The requirements for both loans are more stringent, but these are the most important of them all. If you think that you qualify for a loan of this nature, look into it. It might allow you to purchase a home with a smaller than typical down payment, without the ability to qualify for another loan or even if your income is not very high.
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