The United States Department of Agriculture (USDA) loan program was designed to help improve the lives of those in rural America through homeownership. It all began in 1935 when President Roosevelt signed an executive order establishing the Resettlement Administration. This administration was particularly helpful during the Great Depression by providing aid to families and helping them relocate. Over time, this act was expanded to include the USDA Rural Development Department, which today administers USDA home loans.
Today, the USDA offers low-interest mortgages with zero percent down that are designed for Americans who live in rural areas and may not have the credit to qualify for a traditional mortgage. This program promotes economic development in areas that may not see significant growth otherwise. With this loan, borrowers with a credit score as low as 640 can qualify for a mortgage with interest rates as low as 1%.
Types of USDA Loans
There are actually two types of USDA loans, the USDA Single-Family Direct Loan and the Single-Family Guaranteed Loan. Both were created to boost homeownership in rural and suburban areas but are very different. The guaranteed loan is meant for low-to-moderate-income families and is the most popular. The direct loan is for very low-income families. The difference in these loans is how they are funded. With the direct loan, the USDA is the lender, while a guaranteed loan is generally obtained through an outside mortgage lender. Whichever route is taken, both loans are backed by the USDA.
Many people may be surprised to find that they meet the standards to qualify for a USDA home loan. First, you must be a U.S. citizen or have been granted permanent residency. You’ll also need to provide proof of income. Also, your monthly mortgage payment must be 29% or less of your monthly income while the remainder of your monthly payments (credit cards, car payments, etc.) cannot exceed 41% of your income. Keep In mind that the higher debt ratios are considered if your credit score is above 680. While there are income limits to qualify for a USDA home loan, it varies by location and household size. You can find what the limits are for the county where you live here.
How to Apply
Once you’ve determined that you’re eligible, applying for a USDA loan is similar to any other type of loan. The first step is to find an approved lender and get prequalified. You’ll then want to find a USDA-approved home. Once you sign a purchase agreement, you’ll then go the processing and underwriting before closing.
We Can Help
The mortgage process can be difficult enough and we understand that the USDA loan process may seem overwhelming. However, finding a lender that is familiar with the intricate details and can help you navigate the process effectively can make all the difference. Silverton Mortgage is proud to offer USDA loans to those who qualify. Our experienced loan originators are prepared to answer all your questions to see if a USDA loan is right for you. Contact us today and see how we can help you discover the American dream of homeownership.