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What is USDA Financing?

What is USDA Financing?USDA Financing

Compass Home Group of Keller Williams American Premier Realty
Call or Text 443-360-0086

So, Warren Buffet spends more on dinner than you make in a month, and you’ve never required the services of an investment banker, but you have good credit and you long to own your own home. What if we told you that there is a mortgage loan program out there for people just like you and (here’s the best part) it requires no down payment?

Despite what you may have been hearing in the media about lenders tightening their belts and mortgage requirements becoming more stringent, the USDA offers a zero-down mortgage for folks who don’t make gobs of money.

History of the USDA Loan

In 1944, the Department of Agriculture was reorganized and the USDA Rural Development program was born. It set about providing, among other things, rural housing loans that fell outside the jurisdiction of the farm programs handled by the Farmers Home Administration (FmHA).

Today, the Rural Development agency makes direct loans, loan guarantees (similar to the FHA-guaranteed loan) and grants to low-to-moderate income families. The loans are used to rehab, build and purchase homes in rural areas.

Homes Eligible for the USDA Mortgage

The operative words for this mortgage are “rural development,” meaning that the home must be located within a rural area. To determine if an area is appropriate for the USDA loan, give us a call and we would be happy to research it for you 443-360-0086.

Here are a few additional requirements:

The house should be modest for the area in size, design and price.

The price of the home must be at or below the loan limits for the area.

The home must meet certain standards set forth by the USDA’s Housing and Community Facilities Program.

USDA Mortgage Overview

Breaking down the USDA’s rural development program is a bit confusing as the department uses a numbering system to identify the various loans available.

If you’re in the market to purchase a home, the USDA program offers two options: a loan guarantee or a direct loan. This is the confusing part: They both fall under the label of the “Section 502 Loan Program.” Your income will determine which loan is best for you.

Both of the programs are for low-income borrowers, but the guaranteed loan has more flexible income limitations. Both loans are for homes located in rural areas (those with a population of no more than 20,000). If you own a home within 50 miles of the one you wish to purchase, you are ineligible for the programs.

The Guaranteed Mortgage Loan

The loan guarantee program, officially known as the Section 502 Guaranteed Loan, is similar to the FHA or VA loan in that the borrower obtains a loan from a lender and the government guarantees its repayment.

USDA eligibility requirements for the guaranteed loan include:

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Compass Home Group of Keller Williams American Premier Realty
Tim Langhauser & Michele McCartin
Call or Text 443-360-0086 for information Broker: 443-512-0090
Get a FREE REPORT of your HOME’S VALUE at www.ListWithCompass.com

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