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USDA Loans Aren’t Just For Farmers

October 24, 2022 by chorton Leave a Comment

You wouldn’t be alone in thinking USDA loans were only for rural farmers.

The program is accessible through the United States Department of Agricultural. The Rural Development (RD), which was initially called the Farmer’s Home Administration, administers the program.

Russell Hood, an originator of the Meriden-based company Planet Home Lending, stated that about half of those looking for a mortgage through Planet Home Lending don’t know anything about USDA loans.

It is worth taking the time to find out if you are eligible. You might be surprised at who qualifies. USDA loans can offer many advantages over other programs if you’re eligible.

Most people are aware that USDA mortgages are intended for rural residents. Many people think they won’t be eligible because they don’t consider themselves rural residents.

The definition of “rural” can change between different government programs. For USDA loans, however, “rural” can be a surprisingly low standard. It refers to any town, village or city with fewer then 20,000 inhabitants that isn’t located in a Metropolitan Statistical Area. An MSA is defined by the Census Bureau as a group of counties that surround a city with more than 50,000 inhabitants.

There is also some flexibility for fast-growing areas to remain eligible for “rural” status for a period beyond these points.

This means that 97% of America’s land mass is considered “rural” to qualify for a USDA loan. According to a report, 34% of Americans live in an area eligible. Even suburbs outside of major cities like the western part of Olympia, Washington’s capital, and parts Long Island, New York, are eligible.

USDA loans can also be very useful in helping people who otherwise wouldn’t be able to purchase a home. To be eligible for a USDA loan you must be not eligible for a conventional PMI free mortgage. You’d need to pay a minimum of 20% down payment in order to achieve this, which many people don’t find realistic.

One of the greatest benefits of USDA loans is the fact that you don’t have to make any down payments.

If you are eligible, one final reason to consider USDA loans is that they don’t have as much impact on your finances than other government-sponsored mortgage programs. It’s often a better option if the income and property meet the USDA standards.

The upfront funding fee for most government-backed mortgages is usually 1%. This is lower than the 1.4% to 3.6% charge for VA loans, and 1.75% for FHA loan. FHA loans have an additional fee of 0.45% to 1.5%.

USDA loans are often offered at lower rates. This is partly due to the way RD works together with lenders to provide USDA Guaranteed loans. This is a bad term as it does not guarantee you will get a loan. The USDA “guarantees” up to 90% loan amount. In other words, if you default on your loan, the USDA will reimburse your lender up to 90%.

Although this guarantee does not directly benefit you, it can make things more affordable for you. Lenders are almost guaranteed to recoup some costs in one way or another. This means they can pass lower rates on to you. That could result in significantly lower monthly payment with USDA loans.

USDA Direct loans are cheaper than conventional mortgages. The fixed rates for low-income and very low-income buyers were set at 3.25% as of October 2022. This is compared to 6.65% for a conventional loan. The average USDA loan cost $178,400 in 2021. This is $380 less than what you would pay if you borrowed conventionally.

 

Original Blog: https://finance.yahoo.com/news/zero-down-usda-mortgages-arent-100000653.html?guccounter=1&guce_referrer=aHR0cHM6Ly93cmVuZXdzLmNvbS8&guce_referrer_sig=AQAAAEMfd_s6cf9cnjRg0x12RmnucbOROcR906XA3ztVq5J9aer0l4bSUkxUFB1PFtF6tNXBmMtHZDwWjWCjGfjlYJZKBRyn1jXmUAqGA9qW95XW9lRqq1wR2LFGKnvTYJ2r3MZWVV0zD9OAkyxJbok30FkWB5tB8zeonGDjhM1ifUgf

 

Filed Under: Blog, Buying a home Tagged With: Blog, buying a home, buying homes, erath county, Homes for sale Stephenville TX, loans, mortgage, mortgage programs, mortgage rates, Preferred Properties of Texas, real estate, realtor, stephenville tx

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