Applying for a USDA Loan? Here are Some Good-to-Know Facts
USDA home loans in Texas and other parts of the U.S. are provided to eligible rural and suburban homeowners (for repairs) or buyers interested in buying a house in a rural area. USDA loans are backed by the U.S. Department of Agriculture. To help borrowers with low or moderate-income realize their dream of owning a house, these loans have relaxed eligibility criteria as compared to conventional loans. Borrowers, for instance do not have to pay down-payment and are offered lower mortgage rates. Despite the benefits of USDA home loan, it is still one of the least talked about loan program, primarily due to the late introduction of the program. To help create awareness about the home loan, the post lists some important facts about them. Take a look.
1. Eligibility Criteria
To be eligible for a USDA loan, the applicant has to fulfill the following criteria:
a) They must be a U.S. citizen.
b) The applicant’s income must not exceed 115 percent of the area’s median income.
c) The property must be located within a rural area, as identified by the USDA.
d) The applicant must be without proper housing, but should be financially e) stable to afford mortgage payments.
f) Though the USDA does not require borrowers to have a certain credit score, most lenders would look for applicants with a score of 620 or more.
g) The borrower must intend to use the house as their primary residence.
*2. Maximum Loan Amount
The USDA does not set a cap on the maximum amount you can borrow. If you are eligible, the lender will consider various factors such as your debt-to-income ratio, credit score, assets and liabilities, and payment history to determine the amount you are eligible to borrow.
3. Payment Obligations
One of the major advantages of opting for a USDA loan in Texas or any other part of the U.S. is that you do not have to pay a down payment amount. The USDA, however, charges an upfront funding fee of 1 percent (of the purchase price). Further, you must also pay a monthly mortgage insurance premium, that is charged to help the lender hedge against losses that arise when a borrower defaults.
4. You can get the Closing Costs Financed Into the Loan
When closing a USDA loan, the lender has to pay certain closing costs (associated with processing the loan) such as title charges, prepaid interest, and insurance premium. These costs are transferred to the borrower. That said, the USDA allows the buyer to roll these costs into the loan. Further, the borrower can also request the seller to contribute towards closing costs (which must not exceed 6 percent in most cases).
The USDA recognizes 97 percent of the land in the U.S. as eligible area for USDA home loans, therefore, making it one of the most accessible loans. Before you opt for a USDA loan in Texas or any other part of the U.S., talk to a mortgage consultant and provide them your personal info. These professionals have in-depth knowledge about different loan requirements and can advise you on the program best suited for you.