USDA Loans may allow you to qualify with less than perfect credit. Fortunately for today’s buyers, there are programs that can help them qualify for a mortgage with little or no down payment. One that is not widely discussed is the USDA Single Family Housing Guaranteed Loan Program.
What is a USDA home loan?
The United States Department of Agriculture, USDA, administers the program but does not actually loan money. Similar to loans backed by the Department of Veterans Affairs, VA, or Federal Housing Administration, FHA, these loans are guaranteed by the USDA. Private lenders, such as banks or credit unions, still loan money to the home buyer but they know that the USDA will pay if the borrower is unable.
This allows lenders to assume less risk, and as a result they are okay requiring less money down.
Who can use the USDA program?
Contrary to its name, the USDA loan is not only available for those in an agricultural setting. The USDA loan is designed to help “low and moderate income households have the opportunity to own adequate, modest, decent, safe and sanitary dwellings as their primary residence in eligible rural areas.”
To use the USDA loan, applicants must meet income requirements and be purchasing a home for their own primary use in an eligible area. Potential homeowners can look up each property’s address to see if it qualifies or talk to a lender about using a USDA loan in their area. The loan can be used for new homes, existing homes, and even homes that need some renovations.
If coming up with a sizable down payment is holding you back from your dreams of home ownership, the USDA loan may be just the answer you are looking for.
How USDA Loans Work
- Purchase your home with as little as 0% down payment.
- 30 year fixed rates.
- 1% upfront USDA guarantee fee
- .35% monthly USDA guarantee fee
- USDA loans are governed by the U.S. Department of Agriculture.
- Pay your mortgage off at any time without pre-payment penalties.
- Household income limits apply and are based on location.
- Only available in certain areas. All of SW Colorado qualifies.
- Buy a primary single family home.
- Refinance up to 100% of your primary home’s value if you already have a USDA mortgage
Have questions? Give us a call! One of our mortgage specialists would be happy to answer all of your questions.
**Montezuma Mortgage LLC is not affiliated with or acting on behalf of or at the direction of FHA, VA, USDA or the Federal Government.