Let The USDA Put You In Your Next Home

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Let The USDA Put You In Your Next Home

24 May 2017
 Categories: Real Estate, Blog


You may be curious as to how the United State Department of Agriculture (USDA) figures into the home buying equation, but if you dismiss this valuable resource you may be regretful. While this lending option targeted farms originally, it now covers some surprising areas of the country. Just like the other well-known government-backed lending options, like FHA loans, this guarantee program presents a way for those with fewer financial resources and less than perfect credit to become homeowners. Read on to learn more about the USDA home loan program.

What is meant by a "guarantee".

The USDA itself doesn't actually loan out any money; instead, it works with lenders to make the loan approval process easier. Just like the other government-backed home loan programs, such as the FHA and VA, these loans are guaranteed by the U.S. government. The guarantee is not that the loan will be approved, you still must qualify for the loan based on certain financial criteria, but that the loan is guaranteed to be paid to the lender no matter what. For example, if you default (fail to make payments) on a mortgage loan, the lender will likely lose money on the deal. If you default on a government-backed loan, such as the USDA loan, the lender will be paid for any losses that occur should the homeowner default on the loan. What this means for you, (the borrower) is a greater potential for lenders to grant these types of loans.

The covered areas.

While a qualifying property does not necessarily need to be a farm, it does need to be in areas that the USDA terms "rural". The purpose of this loan is not simply to benefit consumers but to encourage people to settle in places that are located well outside of urban areas. You can enter a given address at the USDA site, and view a map of covered areas. You might be surprised to note that coverage areas are extensive, and include wide swaths of counties and states and many suburban areas.

Two USDA loan programs.

1. The Section 502 Direct loan program is perfect for those who cannot save up any down payment money and have a very low income. This amount of income is limited and varies from county to county.

2. The Guaranteed loan program allows applicants to earn slightly higher incomes, but you must be able to come up with a 10% down payment amount.

To get more information about these USDA loan guarantee programs, speak to a real estate agent in your area, and get started on your dream home search. Click here for help on finding property for sale!