The United States Department of Agriculture is home to a little known mortgage program that’s actually quite large. Along with VA loans, USDA mortgages are the only zero down mortgage product on the market today. Homebuyers can finance rural property and even small farms with some of the USDA’s mortgage programs.
Types of USDA Loans
Loan Guarantee Programm – Section 502 This program functions similarly to FHA loans; the lender makes a loan, not the USDA itself, however the USDA guarantess the to pay the lender the full amount should the borrower default. This program is attractive because it does not require a down payment.
Mutual Self-Help Program – Section 523 This loan program enables borrowers to buy a fixer-upper or personally build a new home and use their own labor to build some “sweat equity.” Homeowner’s must commit to doing 65% of construction or repair work on their own.
Home Repair Loan and Grant Program – Section 504 This refinance program helps low income homeowners obtain a USDA refinance and borrow to fix major issues such as a leaking roof or foundation crack. Generally this program is coupled with a grant that makes the interst very low–sometimes as little as 1%.
Qualifying for a USDA Loan
USDA Loans are made to families with incomes below 80% of the median in their area. This is specifically meant to help lower income borrowers that could not afford a conventional mortgages. Also, USDA loans must be issued in “rural” areas. Rural is defind as areas with 20,000 residents or less and is loosely enough interpretted that many suburbs of large cities can qualify.
To learn more about the USDA Rural Mortgage Program visit their site today.