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Officially known as the Section 502 Single Family Housing Guaranteed Loan Program, the USDA loan is a $0 down mortgage option available to rural and suburban homebuyers in the United States. USDA loans are issued by qualified lenders and guaranteed by the U.S. Department of Agriculture (USDA).
The USDA loan’s purpose is to provide low-to-moderate income households the opportunity to achieve the dream of homeownership in eligible rural areas, and does so by guaranteeing each USDA loan against default. This guarantee allows for amazing benefits, such as zero down payment, low rates and lenient credit requirements.
The USDA does not finance single-family guaranteed loans, but guarantees the loan against default. Because of the USDA loan guarantee, lenders can take on more risk and offer eligible rural homebuyers advantageous rates and terms.
This means USDA loans work like other major mortgage options, but have unique guidelines and requirements that are best handled by a lender with USDA loan experience. Interested borrowers should first start with a lender to determine if they are eligible for a USDA loan.
The USDA has its own guidelines and requirements, including eligibility requirements for both the homeowner and property. Moreover, lenders may have their own internal guidelines and requirements in addition to those set by the USDA.
Once you decide to purchase a home with a USDA loan, you will complete the following five steps:
To qualify for a USDA loan, borrowers must meet credit and income criteria set forth by the lender and the USDA.
At a minimum, the USDA requires:
To help determine if you are eligible, see our next section on USDA home loan eligibility.
USDA loans are available to homebuyers wishing to purchase in what the USDA considers a rural area. Metropolitan areas are generally excluded from the USDA loan, but suburbs of large areas may be eligible.
Additionally, USDA loans are only available to homebuyers wishing to purchase a single-family home that will be their primary residence. Homes with acreage may be eligible, if the site size is typical for the area and not used principally for income-producing purposes. Income-producing property and vacation homes do not qualify.
The USDA Guaranteed Home loan has assisted thousands of homeowners in route to their dream home and continues to be one of the most advantageous programs on the market today.
Using a USDA Loan?
Call (877) 701-8732 or Get Started