USDA Misconceptions
Forget the stereotypical farmhouse! USDA loans can bring opportunities in surprising places you wouldn’t think are “rural.” These government-backed loans have no down payment options and target areas outside major cities. The USDA defines a rural area as a population no larger than 35,000 people. This means many suburbs and even some smaller towns qualify.
USDA loans have perks many conventional loans don’t, making them extremely sought after in the qualified areas.
One of the major advantages of a USDA loan is you are able to finance up to a 100% of the home purchase price. This allows you to allocate more money towards closing costs and prepaids.
USDA loans offer potentially lower interest rates than conventional mortgage products. This can be extremely advantageous for borrowers who qualify.
While there is no PMI with a USDA loan, they do still require you pay both an upfront and annual guarantee fee. The upfront fee is normally 3.5% of the loan’s value but you may have the ability to roll it into the loan.
While normally a credit score of 640 or higher is preferred by most lenders. You can still qualify with a lower score as long as you can demonstrate a strong ability to handle debt.
