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What To Know About USDA Home Loans

by Elaine Ryan

If you have nearly given up on your dreams of becoming a home owner, you may be happy to hear about a government sponsored home loan program that could be perfect for you. Problems saving up a large down payment and having less than perfect credit keep many from owning a home, but this program from the United States Department of Agriculture (USDA) is custom-made for consumers like you. If you want to finally be able to spend your hard earned money on a house instead of a rental, read on to learn more about the two type of USDA loans.

The USDA Section 502 Direct Loan Program

Buying a home with a 0% down payment is nearly unheard of in the home financing industry. In fact, the only other opportunity for a 0% down payment is the Veterans Administration home loan. The only sticking point for this type of loan is that it is aimed at those who are low income, so you need to have an income that falls into the very low to low bracket. The exact cut-off for income varies quite a bit from county to county, so be sure to check the chart.

The USDA Guaranteed Loan Program

If you can come up with just a minor amount of down payment, you can still qualify for a USDA loan if your income is a little too high for the Section 502 Direct program. You must able to put at least a 10% down payment down for the loan, and your income must fall into the low to moderate income bracket to be approved. When you consider that most conventional loan programs could require a 20% or even higher down payment, you can see that this USDA program is still quite a good deal.

No Need For A Farm

Many people mistakenly assume that a loan guaranteed by the Department of Agriculture may require you to buy a farm out in the boondocks, but that is not the case. The purpose of this program is to encourage growth away from crowded city centers and out to more rural areas, but you can see from viewing the coverage map that suburban areas just outside of large cities are included as well as huge chunks of many states that include medium sized cities and towns. There are no actual "agricultural" requirements for these loans, just a desire to have a home outside of an urban area.

To learn more about the USDA loans, speak to your real estate broker today.