The current Coronavirus pandemic has not left a single country into economic decline. Even the United States of America is experiencing an upscale in unemployment. As a result, its people need a helping hand in this time of disturbance.
Indeed, this is the time where bank loans can come in handy. When it comes to mortgage loans, there are many options. However, there is one particular loan that can help in the current scenario.
What is the USDA Loan?
USDA loan stands for United States Department of Agriculture. It is a mortgage loan that requires no down payment and minimum interest rate.
Each year, the United States supports thousands of Americans in buying homes in rural areas. USDA mortgage loan is for low-income people who can not fulfil the payments for a proper mortgage loan. To be specific, the USDA loan requires an upfront purchasing fee of 1% from the loan amount. Then, a .35% annual fee based on the remaining principal balance each year.
For example, a loanee gets a $100,000 loan through the USDA loan program. So, he would pay a $1,000 upfront purchasing fee. Plus, a monthly payment of $29.17 for the annual mortgage insurance. However, it is not a necessity to pay the upfront mortgage fee in cash. There is an option to pay later as a part of the loan.
Different Types of USDA loans
Indeed, the USDA loan program is specifically for unfortunate citizens. It serves this group of people in various ways. Specifically, there are three types of USDA loans available.
Firstly, the Direct Loans is for those who are at the very bottom of low-income individuals. In detail, the current interest rate is 3.125%, but it can get as low as 1%. However, home values vary by geographic location. So, each has its price limit for this particular loan program.
Secondly, the USDA Home Repair Program is for those who wish to repair or upgrade their existing home. It offers loans up to $20,000 with a fixed interest rate of 1%.
The last and popular type is the USDA Guaranteed Loans. The borrowers can avail the lowest rate of interest with no down payment. A USDA approved the lender will assist the interested individual.
Am I Eligible?
Moreover, the USDA loan program has been around since the year 2007. It has helped millions of US citizens. It is an ideal program for those who have low income.
Where’s the catch?
Although the USDA loan program meets the standards of financially unstable individuals who want to own a home, there are some conditions.
Most importantly, the home should be at a particular location. Either you belong to rural areas, or you can shop for a home in the specified location. ThisIn other words, you have to say bye-bye to the hustle and bustle of city life.
Secondly, you need a credit score of 650 or above to qualify for the USDA’s automated underwriting system. Otherwise, individuals who score below will be eligible for manual underwriting, which means the process will take longer for approval for your dream home. Plus, the appointed lender may even ask for proof of you paying the past 12 months utility bills on time.
Overall, the rules may seem strict, but in the end, you can avail your dream home in the open field of the rural areas.