Ready to buy a home but strapped for cash? You’re certainly not the first one. Nor will you be the last. But the good news is there’s a home loan option available that requires no down payment. In addition, it’s quite possible you won’t even have to pay your closing costs. Sound like a winner? Yeah, we think so, too. In the next two or three minutes, find out everything you need to know about USDA loans – and why one might be the perfect fit for your homebuying needs.
What is a USDA loan?
A USDA loan is a government-backed loan specifically designed for low- and moderate-income families that might not qualify for a number of other loans. USDA stands for U.S. Department of Agriculture, so it seems fitting that these loans only work for homes in rural areas. However, this doesn’t mean that USDA loans only cover homes way out in the sticks. “Rural,” in this case, has a rather broad definition. More than anything, it just means you can’t live right in the heart of the city. If you’re OK with that – and interested in saving major cash at closing – you’ll want to finish reading this article.
What are the requirements for a USDA loan?
You can check out the full list here, but it’s really not that many. The biggest one is that your household income can’t exceed 115% of the median household income in the area where you wish to buy. There is no specific credit score requirement for a USDA loan; you must simply show a willingness and ability to repay debts. Speaking of credit, all payments on your credit report should not be more than 41% of your gross monthly income. These include the new mortgage payment being proposed. Other USDA loan requirements include making the new home your primary residence and being a U.S. citizen.
What are the perks of a USDA loan?
USDA loans are 100% financing, so you won’t have to pony up a down payment. Because program lending covers the appraised value, not the purchase price, you may also be able to include closing costs and home repairs into USDA financing. Another benefit is there’s no set limit on the size of your loan, aka your purchase price. This amount is based entirely on your ability to repay the loan. Likewise, there’s no cap on acreage for your new home. And, lastly, eligible applicants can purchase a new or existing home, and the program is for all homebuyers – not just people buying their first home.
The bottom line
At Fairway of the Carolinas, we’re all about helping you find the loan program that’s right for you. Contact us today so we can get you pre-approved and well on your way to the home of your dreams. We’ll steer your loan all the way from application to closing. Talk soon!