The USDA Purchase Loan, officially known as the USDA Rural Development Guaranteed Housing Loan Program or USDA RD Loan, is a mortgage loan program offered by the United States Department of Agriculture (USDA). It is designed to assist individuals and families with purchasing homes in eligible rural areas and The USDA home loan can be used to purchase a new or existing home, as well as to refinance an existing USDA mortgage.

• One of the most significant benefits is that eligible borrowers can finance 100% of the purchase price of a home without the need for a down payment. This makes it an attractive option for individuals who may not have substantial savings for a down payment.

• The home must be located in a rural area as defined by the USDA The classification of a specific area as rural is important for individuals seeking USDA loan programs, as eligibility depends on the property being located in a designated rural area according to the USDA guidelines.

• USDA loans often offer competitive interest rates compared to conventional loans. This can result in lower monthly mortgage payments and save borrowers money over the life of the loan.

• The USDA Purchase Loan program has more lenient credit requirements compared to many other loan programs. While a minimum credit score of 580 is typically required, the USDA takes into account the borrower’s overall credit history and financial situation.

• USDA loans have income limits to ensure they are assisting individuals and families with low to moderate incomes. If you fall within the specified income limits and are looking to purchase a home in a rural area, the USDA Purchase Loan can provide financial assistance and support. These limits are based on the area’s median income and the number of people in the household. The USDA aims to provide affordable housing options to low- and moderate-income families in rural areas.

• USDA loans have lower mortgage insurance costs compared to other loan programs. USDA loans require borrowers to pay an upfront fee at closing, known as the guarantee fee. The 1% guarantee fee is lower than the mortgage insurance premiums required by other loan programs such as FHA, but it can be financed into the total loan amount. In addition, USDA has an annual mortgage insurance requirement of .35% of the loan amount which is amortized over 12 months and is included in the monthly mortgage payment.

• While USDA loans have flexible credit requirements compared to conventional loans, you still need to demonstrate creditworthiness. An underwriter will review your credit history, including your credit score, payment history, and outstanding debts. While there is no specific minimum credit score requirement, a higher credit score will generally improve your chances of approval.

• The property being purchased must meet certain requirements set by the USDA, such as being located in an eligible rural area and meeting specific property standards. USDA loans can be used to purchase single-family homes, townhouses, and some condominiums in eligible rural areas as the program aims to promote homeownership in rural communities and stimulate economic growth in these regions.

The USDA Purchase Loan can be a valuable option for individuals and families looking to purchase a home in a rural area, especially for those who may not have a large down payment or have less-than-perfect credit. USDA loans are specifically designed for rural areas and have specific eligibility criteria. To determine if a property is eligible and if you qualify for the USDA Purchase Loan, contact one of our USDA loan specialists today.