For low-income earners, taking out a home loan can be an expensive venture. Borrowing money to get a mortgage may be too much to afford for them. Thanks to the US Department of Agriculture, there is now a way for low-income borrowers to take out a mortgage loan. With a USDA home loan, they can get financing for the mortgage. For low-income earners who think about USDA home loans, here is a short guide on what you need to know when getting this kind of mortgage.
How the Program Works
The US Department of Agriculture provides low and moderate-income borrowers with assistance in obtaining mortgage financing. At the heart of every program is reducing the burden of a huge downpayment. Under the program, low-income individuals can directly obtain funds from the USDA when they have no other means of securing a loan.
People who think about USDA home loans can go directly to banks that specialize in USDA home loans. The bank will provide the necessary assistance with the required paperwork, making sure that you qualify for the program. They will work with you from start to finish of the loan process. The bank will provide the loan and then the USDA will work with the bank to ensure that you take advantage of the benefits the program has to offer. Check for a USDA home loan approved bank in you area.
How Do I Qualify?
While the requirements for qualifying for a USDA home loan are pretty straightforward, it, however, disqualifies urban dwellers from securing a loan. The USDA home loan program is designed to promote rural development so those residing in the city may not qualify. To see if your property qualifies for the program, you can check the interactive online tool of the USDA.
If your property qualifies for the program, the next step is to check if you are eligible to become a potential borrower. There are certain income requirements you need to meet. As mentioned, the USDA home program is designed to promote rural development in low to middle income areas. Aside from the property and income, the USDA also requires the following:
- You personally agree to live in the property as your primary residence
- You are US citizen and a qualified US noncitizen national, or alien
- You are legally capable to pay the loan obligation
- You have not been suspended or debarred from taking part in Federal programs
- You have showed your willingness to satisfy credit obligations in a prompt manner
- You should also have sufficient income to pay the monthly payments and your credit score qualifies under bank standards.
USDA home loans are expensive
USDA home loans, however, are quite expensive. They charge 2% of the loan amount up front. However, you can add the fee to your loan balance so you do not have to shoulder it at the end of the loan. You can settle the amount as part of your monthly payment throughout the duration of your loan.