USDA Interest Rates
USDA mortgage loans are, without a doubt, one of the most appealing financing options when it comes to purchasing a new home. A USDA loan is basically a low interest, no down payment mortgage designed for low to moderate-income people in rural areas. It’s a national program that was created by the U.S Department of Agriculture to help fund first-time homebuyers or those that do not meet the conventional home loan requirements.
USDA home loans are very appealing as they require no down-payment, come at relatively lenient terms, including low credit score and interest rates. However, they have a few downsides, including the inability for borrowers to exceed income limits and being exclusive for properties in rural areas.
In this read, we are going to take a closer look at USDA interest rates, specifically how you can get the best ones.
How to Get the Best USDA Interest Rates
1. Check Whether or Not You Qualify for a USDA Home Loan
USDA home loans are meant for single-family owner-occupied houses in the less urbanized regions. You can easily check whether a property is eligible using the USDA’s official rural property lookup tool.
This government body also establishes limits on household income, which varies from county to county. In order to qualify, you need to have an income of between 50 to 80 percent of the average income in the region.
2.Ensure Your Credit Reports are Accurate
As with any other loan, credit report plays a major role. Even though the USDA is lenient and can offer loans to people with poor credit scores, it’s still advisable to ensure your credit reports are accurate. You can get a free credit report annually from any of the 3 primary credit bureaus.
The accuracy of your report is vital as the credit score is based on this information. As earlier mentioned, there’s no minimum credit score for USDA mortgage loans, but if you have a score of 580 or higher, the underwriting process is automated, making things easier. Also, the best USDA interest rates go to those with high credit scores.
3. Compare the Various USDA Home Loan Lenders
There’s a wide array of local, regional, and national USDA mortgage lenders. The best one will depend on your needs, including the need for excellent customer service, smooth online experience, whether you have a poor credit score, etc. Some of the best lenders with low USDA interest rates include:
- New American Funding
- Guaranteed Rate
- Quicken Loans
- Wells Fargo
4. Compare USDA Interest Rates for the Three Types
USDA home loans come in three types, namely:
Direct Loans – In this type of loan, the government subsidizes the borrower’s monthly payment while their income stays below the region’s low-income level. Direct loans are for low or very low-income people who would otherwise not have access to mortgages. USDA interest rates in this option tend to be lower than their counterparts.
Guaranteed Loans – In this option, the borrower gets a home loan from a private lender. The United States Department of Agriculture guarantees the loan, thus protecting the lender from losing money in case the borrower defaults.
Housing Repair Loans & Grants – If you own property in a less urbanized region and have a very low income, you can qualify for a 1% interest rate loan to repair or upgrade your home. If you are a senior and have very low income, you may qualify for a grant in order to get rid of health and safety hazards from your property.
5. Get USDA, VA and FHA Loan Estimates
If your income level and the property meet the USDA loan guidelines, the next step is to ask for FHA and USDA loan estimates. If you are eligible for a VA Loan (United States Department of Veterans Affairs), then ask for a VA loan estimate as well. Next, compare these offers for the best fees and interest rate combination.
When you shop around, you are bound to save hundreds, if not thousands of dollars on the closing costs, not to mention finding a lender with the lowest USDA interest rates.
USDA Home Loans Help You Save Money
As mentioned earlier, a USDA home loan is one of the few that enables you to get 100 percent financing for a house. You pay a guarantee fee on a U.S Department of Agriculture mortgage loan regardless of whether you make a down payment or not. There is an upfront fee that is paid at closing and another one paid on a monthly basis for 30 years (the typical term of USDA loans).
The good news is that the USDA guarantee fees are lower than private mortgage insurance (PMI) or FHA. With the tips above, you might be eligible for one of the best home loan options ever.