There are many different types of loan programs out there for buyers.  Every loan program has different qualifications that buyers must meet in order to qualify for the loan.  If you are searching for a Locust Grove home, then one loan your mortgage lender may discuss with you is the USDA’s rural development loan.

What is a USDA loan?

When you think of the USDA, the United States Department of Agriculture, a home loan probably isn’t one of the first things that comes to your mind.  However, the USDA has been offering government backed loans for single family homes since the 1990’s as a way to encourage people who may have difficulty purchasing a house due to income to invest in more rural areas of the country.  Not everyone will be eligible for this loan program because there are income and location requirements.

What are the benefits of a USDA loan?

USDA loans do not require a down payment in order to secure the loan.  The interest rates on these loans are usually lower than conventional mortgage interest rates.

What are the requirements for a USDA loan?

In order to be eligible for a USDA loan, buyers have to meet the following requirements

  • The home needs to be located in an area identified by the USDA.  There are many areas around the US.  The Locust Grove home are in an eligible area for getting a USDA loan, but many around Fredericksburg are not.  To see if your area is in the eligibility zone, go here.
  • You have to be a US citizen or permanent resident.
  • There are income restrictions.  These income restrictions will vary in area due to the median income.  In order to qualify for the USDA loan, your household adjusted gross income cannot be more than one hundred and fifteen percent of the median income in the area.  This can include you and the other people who live in your home.  This income eligibility guide will help you determine if your household would qualify.
  • You have to have a record of dependable income-this means you have to show that you have stable employment.
  • You need a credit score of 640.

I think I qualify for a USDA loan, now what?

If you’ve done your research and think you qualify for a loan, the next step is to find a lender who offers the USDA loans and can verify your eligibility.  If you aren’t sure how to find a lender, you can always ask your Realtor®.

Is there anything different about buying a Locust Grove home with a USDA loan than with another type?

No, the process of actually purchasing the home is the same.  You can negotiate the sales price with the sellers and complete a home inspection.  You will still need to have an appraisal done to verify that the home is worth the amount that the bank is loaning the buyers just like in any other mortgage process.

While you don’t have to make a down payment with a USDA loan, you still can.  Many lenders will require you to purchase private mortgage insurance when you put less than twenty percent down on a home purchase.  USDA loans also come with an annual guarantee fee that users of this loan pay.  It is an annual fee added to your monthly mortgage payment for the life of the loan.  For specifics on the costs of private mortgage insurance or the guarantee fee, you will have to ask your lender since these costs vary per buyer.