There are many different loan types out there. Some are great for the masses—loans like FHA and Conventional. Then, there are loans that have certain restrictions or criteria. VA loans require you or your spouse is a veteran. Jumbo loans are for buying homes that cost more than $417,000. Then there’s the USDA loan, a loan that’s meant for “rural” areas of the US.
Not many people know about the USDA loan because many think that you have to live way out in the boonies to get this loan type. However, the U.S. Department of Agriculture has fairly loose guidelines about what exactly “rural” means, and given some of the perks of this loan, it may be worth checking into should you find yourself needing a home loan. Let’s answer the question, “What is a USDA Rural Housing Loan”?
The Main Perk: 100 Percent Financing
The most exciting aspect of getting a USDA loan is the fact that the USDA offers 100 percent financing. You heard it, that’s no money down on your home purchase. Most other loan programs require between three and 10 percent down, so this is a biggie.
In addition to 100 percent financing, USDA loans are great because they have a lot of the same requirements and guidelines as other loans. They operate on a standard 30-year amortization schedule and offer fixed interest rates.
The Main Catch: Must Be in a Rural Zone
So, what’s the real catch to this seemingly neat housing loan? Well, the main restriction is that the home you purchase must lie in a rural housing area. You can go to the USDA’s website and see if your home is inside or outside their area. Luckily the map of “ineligible areas” looks like Cricket Wireless’s home calling area circa 2004; it’s pretty sparse. You might be surprised to find that your home is indeed in an eligible zone.
As with any loan, there are lots of little things here and there that you should know about before making any decision on which loan to get. This isn’t meant to be a comprehensive guide; just an interest piquing article. If you’d like to hear more of the nitty-gritty details of the USDA Rural Housing Loan, reach out anytime.
Nice newsletter. Good article. Good information. Thank you. Carol
For conventional financing, borrowers with scores at 740 or anywhere above generally receive the same loan pricing (rate and cost). That being said, the better your credit the higher your chances of receiving loan approval with high debt to income (up to 50%) or high loan to value (up to 95%) which can be a major benefit when applying for a new loan. For Jumbo financing, borrowers with credit scores above 800 are generally rewarded with both better pricing and easier guidelines. There are no situations where better credit is a negative when obtaining new financing so we should all continue to strive to reach and then stay in the 800’s.
What are the advantages of a score over 800
Thank you Mike for this information. As a residential realtor the information that you provide is crucial to a successful transaction for my clients. You are indeed a pleasure to recommend to all of my clients. You are so professional, thorough, conscientious and pleasant to work with. !!
Hi Dane! Wanted to make sure I'm clear on this. Am I right in saying that on whichever remodel is done you still take a loss rather than an increase in value - the ROI will never exceed 100% of cost?