If you’re one of those who enjoy living in a rural community and are also looking to buy and finance a home there, you do have choices. But one choice that’s often overlooked is the one the United States Department of Agriculture oversees.
The USDA home loan should be on your list of considerations if you plan on living in a rural or semi-rural area. Why? Here are five good reasons why you should consider a USDA mortgage.
- No Money Down. Perhaps the most attractive feature of the USDA home loan program is the lack of a down payment requirement. 100% financing – the only other 100% loan in today’s marketplace is the VA home loan yet that is reserved only for veterans and other eligible buyers. If you want to come to your closing with as little money as possible, the no money down USDA Rural Housing program is a huge plus.
- Competitive Rates. When you compare interest rates for the USDA loan with say interest rates for a low down payment conventional mortgage, you’ll find the rates for the USDA loan will be a bit more competitive. Conventional loans can increase the rate for some programs when the down payment is anywhere from 3% to 5%.
- Loan Guarantee. The USDA home loan provides a guarantee to the lender. Such a guarantee allows a lender to provide a bit more leeway when evaluating a USDA home loan application. Should the loan ever go into default, the lender is compensated for the loss. As long as the lender approves the application using proper USDA protocol, the guarantee applies.
- Loan Cost. The loan guarantee is funded by both an upfront mortgage insurance premium which is rolled into the loan amount and an annual premium that is paid in monthly installments. When compared to other loan programs with a monthly premium payment, the USDA option is lower. The USDA annual fee (or monthly PMI) is 0.35% of the loan amount compared to the FHA monthly premium is 0.55%, for example when financing the max amount.
- Easier Refinancing. The USDA home loan program has a “streamline refinance” feature which allows homeowners with an existing USDA loan refinance into a new one with much less paperwork.
If you’re in the process of looking for a home in a semi-rural area and have not been told about the USDA home loan program, it could be because your loan officer is not familiar with the program. It’s important that you find a loan officer that has experience with the program and explain your options. If you need assistance, please contact us above or just submit the info request form.