USDA loans are mortgages backed by the U.S. Department of Agriculture as part of its USDA Rural Development Guaranteed Housing Loan program. USDA loans are available to home buyers with low-to-average income for their area, offer 100% financing with reduced mortgage insurance premiums, and feature below-market mortgage rates.USDA home loans are putting people in homes who never thought they could do anything but rent.
The Rural Development loan’s full name is the USDA Rural Development Guaranteed Housing Loan. However, the program is more commonly known as a USDA loan. 97 percent of the geographic United States is in USDA loan-eligible territory.Yet, if you’re like most U.S. consumers, it’s a program you’ve only just learned about. This is because the USDA loan program wasn’t launched until the 1990s.Only recently has been updated and adjusted to appeal to rural and suburban buyers nationwide.
Most lenders don’t even list the USDA loan on their menu.Using a USDA loan, buyers can finance 100% of a home’s purchase price while getting access to better-than-average mortgage rates. This is because USDA mortgage rates are discounted as compared to rates with other low-downpayment loans. Beyond that, USDA loans aren’t all that “strange”.
The repayment schedule doesn’t feature a “balloon” or anything non-standard; the closing costs are ordinary; and, prepayment penalties never apply.
The two areas where USDA loans are different is with respect to loan type and downpayment amount.With a USDA loan, you don’t have to make a downpayment; and you’re required to take a fixed rate loan. ARMs aren’t available via the USDA rural loan program.
Rural loans can be used by first-time buyers and repeat home buyers alike. Homeowner counseling is not required to use the USDA program.