USDA loans, offered under the USDA Rural Development Guaranteed Housing Loan Program, are a special mortgage option backed by the U.S Department of Agriculture. The program enables wishful homebuyers with a low to moderate income realize their dream of homeownership in eligible rural areas. To help borrowers make an informed decision, this brief discusses the pros and cons of USDA loans, followed by the eligibility criteria and a few parting words. Let’s begin.

Pros

• 100 percent financing

• Lower interest rates than conventional loans

• Zero down payment

• Seller contributions allowed up to 6% of the sales price

• No prepayment penalty

• Available for both purchase or refinance

• Gift funds allowed to cover closing costs

• No lot size restrictions

Cons

• Geographic restrictions; the area must be designated as “rural” by the USDA

• Lifetime monthly Mortgage Insurance Premium

• Income restrictions (Should not exceed 115 percent of the area’s median income)

• Takes 1-3 week longer than standard loan

• Loan only for single family and no duplex home

• Buyer must occupy the home

Eligibility Criteria

To qualify for a USDA loan, the applicant must:

• Must be below the income maximum for the area

• Be a U.S Citizen, U.S. Non-citizen National or Qualified Alien

• Use the property as their primary residence

• Not have been debarred or suspended from participation in any Federal program

• Demonstrate the willingness to meet credit obligations in a timely manner

• Legally qualify to incur the loan obligation

Eligible candidates are allowed to build, improve, rehabilitate, or relocate a dwelling only in an eligible rural area. To see if an area is available for USDA financing check the USDA website.

The Final Word

USDA loans are ideal for those who wish to buy a home, but can’t afford to do so with standard downpayments. However, due to geographic limitations, the option works best for people already living in a rural area or are flexible to relocate. If you are looking for USDA loans in Texas, you need to find an approved lender. The loan officers at Service First Mortgage - Davidson Group are experts in USDA loans and can guide you further. Should you wish to learn all other pros and cons of USDA loans, feel free to contact us today!