USDA Loan
What is A USDA Mortgage?
A USDA mortgage is a no-down-payment loan for eligible rural and suburban homebuyers, backed by the U.S. Department of Agriculture. The program aims to support homeownership in these areas through two main loan types: guaranteed loans from approved lenders, and direct loans from the USDA for very low-income individuals. Both require the property to be in an eligible rural area, serve as a primary residence, and meet certain income and credit requirements.
Types of USDA loans
Guaranteed Loans: These are the most common type, offered through private lenders. The USDA guarantees a portion of the loan, which makes it easier for lenders to offer 100% financing to eligible low- and moderate-income borrowers.
Direct Loans: Issued directly by the USDA, these are for low- and very-low-income applicants who may not be able to get a loan from other sources. These loans may include payment assistance and have longer repayment terms.
Key features and requirements
No down payment: A significant benefit is that USDA loans typically require no down payment.
Eligible areas: The property must be located in a USDA-designated rural or suburban area. You can check an address’s eligibility on the USDA website.
Income limits: Borrowers must meet specific income limits for the area where they want to buy.
Credit history: While credit requirements are often more flexible than for conventional loans, a credit history that demonstrates a willingness to repay is necessary.
Primary residence: The home must be your primary residence and a single-family home.
Fees: USDA loans have an upfront fee and an annual fee, which are typically passed on to the borrower. These fees help keep the program subsidy-neutral.
