Owning a home gives you the luxury of comfort, but there’s a long process of homebuying that you must go through before you can settle in. Of course, you’ll have to get the money first, which most people opt for by relying on home loans. A homebuyer can get several types of home loans, and loan terms also differ by state.
One such type of loan is the USDA Rural Development Guaranteed Housing Loan, or simply USDA loan. USDA loans are ideal because you can get them even if you don’t have a very high credit score.
In this article, we’ll be discussing USDA home loans. Read on below to learn more.
More about USDA Home Loans
A USDA home loan is a mortgage that the U.S. Department of Agriculture supports. You’d think that the name suggests that it’s exclusive to rural areas, but that’s far from the truth. It’s a loan that’s applicable for a home that’s purchased as a primary residence. With this in mind, this does not apply to any other type of property, such as rentals or vacation homes.
Aside from that, it applies to any residential property regardless of being in rural areas or not. About 97% of the entire U.S. population is eligible to apply for a loan. However, it’s only applicable if the area where the residence is located has a population of less than 35,000.
The USDA created this loan program to help families who don’t have many options. But again, anyone can get this loan. The USDA prioritizes granting the loan to families that fall under any of the following categories:
Does not have safe and sanitary housing
Unable to secure a home loan from traditional sources (such as banks and lending institutions)
Have an adjusted income that’s at or below the low-income limit for the area where they live
The Benefits of a USDA Loan
A USDA loan offers many benefits, which makes them ideal for many people. Some of these include:
No Required Down Payment
One of the primary benefits of USDA loans is that they offer 100% financing, meaning there’s no need for a down payment. You can get the loan as soon as your application is approved.
Not Exclusive to First-Time Homebuyers
Since USDA loans don’t require a down payment, they’re not limited to first-time home buyers. Homebuyers who plan on buying a new home can apply for the loan again as well.
Banks and lending institutions have variable interest rate loans, which makes the interest rates change at any time. Because of this, it can put you in a bad financial situation if ever interest rates go up in the future.
On the other hand, USDA loans have fixed 15-year or 30-year interest rates, and the lender and applicants must agree with closing the deal.
The Limits of USDA Loans
While USDA loans are highly beneficial, there are still limitations. As mentioned earlier, loan terms vary from state to state. In a place like Colorado Springs, USDA loans are for homes less than 2,000 square feet or less, homes with a market value below the area loan limit.
The limit will depend entirely on the area’s market, with some going up to $500,000 in urban areas then down to $100,000 in rural markets.
USDA Loan Fees in Colorado Springs
Most loans require mortgage insurance as a protective measure for the lender. USDA loans don’t require mortgage insurance, but they have fees that work in the same way.
USDA loans have a 1% fee that’s payable throughout the loan’s lifetime. As of 2019, the USDA also charges a 0.35% annual fee on the loan amount. This fee must be paid within 12 months. If not paid for, then it adds to your repayments. The only way to get around this is to have a 20% down payment.
Regardless of the location, a USDA loan is an excellent option for a permanent residential property. To know if you qualify for a loan, your best course of action is to talk with a mortgage lender. Make sure to look around so that you can get the best deal possible.
Total Lending Concepts offers you the best mortgage options in Colorado Springs. We provide our clients with a wide range of loan options, and our knowledgeable and experienced mortgage providers will take care of getting you closer to your dream home. Contact us today to learn more!