When you go to obtain a home loan, lenders will probably provide you with a variety of options. You may be eligible for a VA loan, an FHA loan, refinancing and more, and they will likely give you choices when it comes to the loan terms. One loan program many rural and suburban home buyers remain unaware of, however, is the USDA Rural Guaranteed Housing Loan Program, often referred to as rural housing, Section 502 or USDA loans.

USDA Loans And What Makes Them Special

With this type of financing, individuals aren’t required to put any money down on the new property, and the mortgage rates offered tend to be better than average. Certain USDA loan requirements must be met before one may obtain a loan through the program, but the repayment terms are similar to those seen with other loans. In addition, buyers never need to worry about prepayment penalties. Loan approval standards tend to be easier with this type of loan, and the program is open to both first-time and repeat home buyers. Furthermore, one isn’t required to go through homeowner counseling to make use of the program.

Who Qualifies For This Type Of Loan?

To qualify for USDA loans, individuals must meet certain income requirements, and these requirements vary not only by state, but also by location within the state. The program offers income guidelines for those with very low income, low income, and moderate income with a guaranteed loan. The buyer must agree to make the dwelling their primary residence and be legally able to secure the loan. In addition, he or she must be eligible for federal programs, be a citizen of the United States, or be classified as a qualified alien or U.S. non-citizen national. Credit obligations must be met in a timely manner, and the individuals must agree to purchase a property which meets all of the criteria of the program.

How Much Can One Borrow Under This Program?

The USDA loan requirements don’t establish a maximum amount of the home loan. Instead, the program looks at the borrower’s debt-to-income ratio to determine how much they qualify for. In most cases, the allowable debt-to-income ratio is 41 percent. In addition, the program typically requires the borrower to have a credit score of 640 or higher and stable employment. Be aware, however, that the only two loan terms offered at this time are a 15-year or 30-year fixed-rate mortgage. This may affect how much one wishes to borrow making use of the program.

Which Properties Qualify?

Although USDA home loans in Texas are often referred to as rural loans, the USDA loan requirements are actually pretty broad. A home in a small town may qualify as a rural residence based on the way the program currently operates. The same is true of many homes in the exurbs and suburbs of major U.S. cities. Check with the USDA to see if a property qualifies for the program, as many will find one they are looking at does. The USDA loan program is designed to help individuals purchase a home of their own. If you are interested in obtaining property and feel this loan may be of benefit to you, contact us today. Be aware that not all lenders offer this type of mortgage product, so you may have to do some searching to find one that does. Make the time to do so, as taking advantage of a USDA loan can be of great benefit to you.