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Believe it or not, but the United States Department of Agriculture actually offers a mortgage product. Initiated back in 1935, this loan program was originally created to help populate the more rural areas of the United States during the Great Depression. Fast forward to 2019, the USDA loan is still a great way to help finance a home in these rural areas.
The United States Census Bureau assigns these specific areas as the national census is taken every 10 years, and new areas become eligible for the program. In fact, just about 97% of United States property is eligible. You can find out if a property qualifies for a USDA loan by contacting a USDA approved mortgage lender.
Saving for a down payment can be tough. Luckily, no down payment is required for USDA loans, making them extremely desirable. USDA loans do not have an adjustable rate mortgage option; however they do have competitive rates for 30 year fixed rate mortgages. Additionally, these loans are backed by the United States Department of Agriculture, so they are of little risk to lenders. These loans are built on two types of insurance; an annual premium to be paid monthly in addition to monthly mortgage payments, and an initial premium to be paid up front.
You may be surprised by which areas qualify as “rural areas.” Many plots of land don’t seem rural at all, but technically qualify for USDA loans. Unlike other 100% financing programs, the USDA loan program does not have any sort of membership restrictions.
There are household income restrictions though. In most cases, 1-4 member households have an income cap at $82,700 and 5-8 member household have an income cap of $109,150. Limits do vary based on location.
Certain documentation will need to be provided just like all mortgage products. Specifics will vary by lender, but chances are you’ll need pay stubs, proof of employment, and W2 forms. Closing costs will need to be paid, despite 100% financing. Your loan officer should be able to provide you with an estimated costs of fees.
If you’re looking for a home in a rural area, and are under the income limit, then a USDA loan could be the way to go.