The USDA (United States Department of Agriculture) has a mortgage program available with many benefits and also some restrictions.
This program is best suited for parts of the country that are deemed to be rural, as the original intent was for farmers to have access to financing in order to incentivize those that would grow food.
Since its inception, the USDA mortgage program has evolved into a popular financing option for those that want to purchase a property in an area designated as rural and that meet the income guidelines set forth by the department.
If a prospective buyer does qualify, the benefits are numerous and helps reduce the barrier to entry of home ownership.
One of the major benefits of the USDA mortgage program is the ability to have a zero down payment. If a buyer can qualify; they would not need to put any money down. 100% financing is allowed and a very popular feature as the only other program in the market that allows 0 down is the VA mortgage program.
Along with zero down, the USDA mortgage program has reduced PMI rates and interest rates. Typically, the USDA mortgage interest rates are at least 0.5% lower than conventional rates.
This helps lower the total payment as well as helps one qualify for more house. PMI is private mortgage insurance and required on all conventional loans with less than 20% down and all USDA loans; however, the PMI rates on USDA loans differ from conventional.
They are measured by credit score, however, the rates are typically substantially lower than ones offered by conventional financing programs. Zero down payment, low interest rates and low PMI rates are the three important features of the USDA program.
Qualifying Although there USDA mortgage program is a great program in this housing market, it is difficult to qualify for. There are geographic retractions whereby the property must be located in a certain area zoned as rural.
The USDA website has a section that allows perspective buyers to input the property address and ascertain whether that specific property is located in such a zone and eligible for USDA financing. Secondly, there are income restrictions.
The program was designed as assistance to low income individuals looking to purchase property and start farms. The income limits have evolved over the years; however, depending on the area many buyers will not qualify as their household income will exceed the maximum limits.
Assuming a buyer can find a property that is located in an eligible area and is under the maximum qualifying income limit; the USDA mortgage program can be an excellent financing option to purchase a home.
This program is designed to help those of lower income that want to escape the big cities and settle into more rural areas thereby attracting a diverse type of buyer opening up financing options for those less fortunate.