Imagine a beautiful home in a charming rural area. With a USDA home loan, your dream home surrounded by clean air could be a reality. The U.S. Department of Agriculture (USDA) offers a loan program that’s attractive for first-time homebuyers of residences in designated rural areas. Potential benefits include little or no down payment options, lower interest rates, and closing costs that you can finance into the loan.
While termed “rural,” many homes that qualify for this program are housed in traditional developments. Rural areas and home types vary. Be sure to ask for details about designated rural areas. Additionally, the home must be owner-occupied and the property location determines the income limit considered for USDA eligibility.
A USDA loan could be a cost-effective financing option for your dream home. Advantages include:
Because it's funded by the U.S. government, USDA financing comes with the rigidity of government procedures. Security of payments and certainty of ownership is important. Disadvantages include:
USDA home loans are an attractive alternative to traditional home loans. Income and location requirements set by the USDA are strict, and the approval process can lengthen based on fund availability, completeness of the application, and the demand in the area.
PMI (Private Mortgage Insurance) applies to conventional loans, and USDA loans do not fall in this category. However, two similar fees apply and are related to the loan amount: the upfront guarantee fee and the annual fee.
Yes, you can refinance your USDA home loan.