Learning About Finance and Money

Not Only For Farms: Surprising News About USDA Home Loans

29 February 2016

Jordy De Pijper

Many people have heard of USDA loans, but mistakenly believed that these home loans were targeted at people who wanted to own a home on a farm with acreage. For those who qualify, however, USDA loans present an opportunity to stop throwing away money on rent and purchase a home in locations that encompass vast areas of all states, including suburban areas. No only will the qualified locations that these loans cover surprise you, but the low or no down payment required for qualifying could make the dream of owning your own home come to life. To learn more about the two types of USDA loans and their requirements, read on.

Not Just Farms

This loan program is sponsored by the United States Department of Agriculture (USDA) and was created to assist people who wanted to move away from city centers and out to more rural areas of the county. The areas covered, however, include major areas of land, including small towns just outside of major cities and many suburban areas, as well as more rural areas. It's easy to view the covered areas by viewing the map, which can be zoomed and also has the ability to search by exact address. Find your home, enter the address on the map, and see if your potential dream home falls into the shaded area.

USDA Direct Loan Program

The Section 502 Direct Loan Program is one of the best-kept secrets in the mortgage industry, requiring an astounding 0% down payment. Only the Veteran's Administration offers loans with 0% down payment, besides the Direct Loan Program. These loans are aimed at people with very low income, so check the map and chart to ensure that you qualify for a loan in your county and state.

USDA Guaranteed Loan Program

Don't be too discouraged if your income is too high to qualify for the requirements for the Section 502 Direct Loan Program above; the USDA has another great loan program that is aimed at people with low-to-moderate incomes. The only sticking point is the down payment requirement is different; you must put down at least 10% to purchase a home. This requirement is still quite a bit lower than the 20% down required by lenders for most conventional mortgages.

How Are These Loans Guaranteed?

It's important to understand what the word "guarantee" means when discussing these types of government-sponsored loans. The USDA makes a guarantee to the bank or mortgage company that the loan will be paid even if the home buyer walks away and fails to pay as agreed on the mortgage. So, while the word guarantee doesn't mean that you are guaranteed to be approved for the loan by the lending institution, it does mean that lenders are far more eager to lend to people under this program, since their risk has been reduced by the guarantee.

Get more information about these USDA loans from your real estate agent or lender, and begin to realize your dreams of home ownership today. Contact a company like First Mortgage Company, Inc. for more information.

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