If you’re a low-income or moderate-income home buyer and you want to purchase a home in a rural or suburban area, you might qualify for a USDA loan. But what is a USDA loan, and how does it work?
What is a USDA Loan?
A USDA loan is a moartgage loan that’s backed by the U.S. Deparmtent of Agriculture. It’s a zero-down-payment loan that you can get in a rural or suburban area. They come with 100 percent financing (that’s the zero-down-payment part). There are many types of USDA laons, so if you may qualify for one, it’s a good idea to talk to your lender about the possibilities; you might want to look into a single family direct homeownership loan or a single family guaranteed homeownership loan.
Single Family Direct Homeownership Loan
This USDA loan helps low-income buyers buy houses in rural areas. You can sign up for a 33-year loan term if you have an income that’s above 60 percent of the average median income for the area or a 38-year loan term if your income is below that. If you buy a manufactured home, these loans are available for 30-year terms.
Single Family Guaranteed Housing USDA Loan
These USDA loans help moderate-income buyers buy a home in a rural area. Your income can’t be higher than 115 percent of the median income for the area, and you must be able to afford payments, taxes and insurance. You must have decent credit, too, for these 30-year loans.
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