You probably associate the United States Department of Agriculture, or USDA, with things like the food pyramid, food safety and plant inspections. But did you know the USDA is also involved in rural development?
A USDA loan is a cost-effective mortgage choice, making homeownership more accessible for low-income residents in specified rural regions. These loans are supported by the U.S. Department of Agriculture, similar to how the Department of Veterans Affairs backs VA loans for eligible veterans and their families. Due to government backing, lenders often provide lower interest rates compared to traditional loans. Qualified applicants can purchase a home without a down payment, though closing costs still apply.
Types Of USDA Loans
There are 3 Main Types of Loans
- USDA Direct loans: For qualifying low-income borrowers these loans have interest rates as low as 1%.
- USDA Loan guarantees: Offer by participating lenders these loans offer low interest rates and low down payments sometimes even 0%.
- USDA Home improvement loans: Qualified homeowners can use these loans for improvements or repairs to their homes.
Do I Qualify for a USDA Loan?
- Residency - You must be a U.S. resident, noncitizen national or permanent resident alien.
- Location - Your home must be located in an eligible rural area. Click to see this map of eligible areas
- Income - Can't be higher than 115% of the median income in your area
- Credit Score - Generally a score of close to 640 is required
USDA Loans are for:
- New Home
- Pre-existing home
- Condominium
- Townhouse
- Land and the cost of building a home
- Commercial property
- Farms and equipment