Overview
The USDA Rural Development Loan (RD Loan) or Rural Housing Loan is one of the most underutilized loan types available to homebuyers today. Guaranteed by the US Department of Agriculture, the program’s purpose is to provide affordable housing to low and moderate income Americans in the rural parts of the country. That said, “rural” is pretty broadly defined, and there are likely qualifying areas in or very near to the market you are buying in.
Advantages / Pros
- 0% Down Payment
- Competitive interest rates with other loan types
- Low “mortgage insurance” guarantee fee that falls off when your equity is 20%
The USDA loan is one of the best loan products on the market. With the VA loan, it is one of the only widespread loan types offering a 0% down payment.
Who Should Use the USDA Loan?
If you are a first-time homebuyer, compare the USDA loan to the other loan choices and see if your property qualifies – even if you aren’t looking for “rural” homes. Many subdivisions and traditional housing qualify.
Disadvantages / Cons
- Strict debt-to-income ratios
- Limited to qualified “rural” areas
- Upfront and annual guarantee fees
- Best used with good to high credit (620+)
USDA loans do require mortgage insurance in the form of an annual guarantee fee for loans with less than a 20% down payment, but so do the other loan types in some form or another. Continue reading “Using the USDA Loan for Rural Homes in Fort Hood, TX”