FAQ About USDA Loans

If you’re looking at the next steps for affordable housing, you’ll likely be interested in USDA Loans and whether you qualify for them–but what exactly is a USDA Loan? In this article, we will go over several Frequently Asked Questions about USDA Loans as well as requirements to qualify.

What Is a USDA Home Loan?

Sometimes referred to as the USDA Rural Development Guaranteed Housing Loan Program (or the Section 502 Guaranteed Loan Program), USDA Home Loans are mortgage loans typically extended to rural families looking to own property or to put money towards a house.

This loan is offered to prospective homeowners hoping to buy, renovate, relocate, or build a home in a “safe and sanitary” eligible rural area within the United States.

Who Qualifies for a USDA Loan?

There are several key stipulations put in place to honor the terms extended by the USDA. The first is that the person applying for the loan must agree to use the respective house as their primary dwelling place after purchase.

The second qualification requires that the applicant be a valid U.S. citizen, a Qualified Alien, or a U.S. non-citizen national.

Crucially, applicants must also meet standard income requirements. These income requirements are assessed based on how many people are in your household as well as some key income questions relative to your employment.

To qualify for a USDA Loan, you must be considered Low or Very Low Income. (Low Income is considered to be 50%-80% of the Area Median Income (AMI) while Very Low Income is below 50%.)

To see if you qualify for a USDA Loan, click here.

Different Types of USDA Home Loans

There are two primary types of USDA Loans: Direct Loans and Rural Repair and Rehabilitation Loans.

Direct Loans are mainly used to improve existing homes, build new ones, or purchase or move an existing house. These are typically granted to low-income households looking to purchase land in a rural, agrarian setting.

In contrast, Rural Repair and Rehabilitation Loans are granted to Very Low Income individuals or households for the purposes of repairing their dwelling or making it safer or more sanitary. These loans can only be obtained by applicants over the age of 62 who cannot repay a Section 504 Loan.

Is Getting a USDA Home Loan Better Than a Standard Mortgage?

There are several key differences between obtaining a USDA Home Loan and going with a traditional mortgage.

One key benefit of applying for a USDA Home Loan is that for eligible applicants, there is no down payment on the house. This can save prospective homeowners thousands of dollars on the upfront costs associated with finalizing the sale of their new home.

While this is tantalizing news for house hunters, it does mean that applicants must adhere to the USDA Loan rules, which dictate where the property can be purchased as well as what homeowners intend to do with the property.

Interested in Learning More?

Curious to see if you qualify for a USDA Loan? Get in touch with us today and begin your application process!