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As of the end of 2021, the USDA loan obligations totaled over $4.8 billion in loans, loan guarantees, and grants. The USDA loan program helps thousands of families each year move into their new homes, and it can help you too.

You can use a USDA loan to purchase a home in a rural or suburban area. Take a look at this USDA loan guide to learn everything you need to know about the USDA loan program and how it might be able to help you too.

What Is the USDA Loan Program?

Through the guaranteed USDA loan program, private lenders issue mortgages to borrowers but the mortgages are guaranteed by the USDA. In the direct program, the USDA issues the mortgages. This program helps those who wish to purchase a home in certain rural areas.

The program is particularly aimed at providing affordable ways for low to moderate-income households to be able to purchase a home. It also aims to stimulate economic growth in suburban and rural areas.

Benefits of USDA Loans

Since the USDA guarantees these mortgages, people who might have a hard time getting a conventional loan still have an option to get a mortgage with good rates and terms.

If you meet certain requirements, then you could be approved for 100% financing, more lenient eligibility requirements, competitive interest rates and low monthly mortgage insurance (PMI)

What Are the Requirements?

Both lenders and the USDA enforce some requirements in order for the borrower and the property to be eligible under a USDA loan. They must be US citizens or permanent residents with dependable income, usually shown by two consecutive years of income.

Many lenders also look at the borrower’s debt ratio, though the requirements vary between lenders. Borrowers should not have any late payments or collections in the previous 12 months.

Depending on the family size, the borrower’s adjusted annual income cannot exceed 115% of the area’s median income. Many lenders want to see a credit score of at least 640. However, if a borrower has under 640, they may be able to qualify via manual underwriting.

The eligible area is quite large and covers about 97% of the US’s landmass and includes over 100 million people. The boundaries do change each year, so look at an updated eligibility map to see where to look for homes.

The home must be your primary residence and needs to be a modest size or common for the local area. In addition, the home cannot have an in-ground pool and cannot be used for income-producing activities.

How Do You Apply for USDA Loans?

Start by finding a USDA-approved lender. A reliable lender will be able to offer USDA loan tips to make the process easier. Then, ask them to preapprove you for a USDA loan.

From here you can begin shopping for your home. Just make sure it meets the eligibility requirements. Once you find a home and the seller accepts your offer, submit your mortgage application through your lender. You will need to provide documentation for your loan.

Once your lender approves your loan, the USDA will also review your application to ensure you meet the requirements. After it’s approved, you can close on your new home.

Start Your USDA Loan Application

The USDA loan program can open the door to homeownership for many people who might not qualify otherwise. Understanding USDA loans is the first step to deciding if this is the right program for you.

Contact Trinity Oaks Mortgage to make your dreams of homeownership come true.

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