How USDA Loans Can Benefit You
There are a few different special mortgage loan types that are backed by the US government, and a good example of one of these is the rural housing loan, or USDA loan. The USDA refers to the US Department of Agriculture, meaning these USDA loans are meant primarily for people in rural areas where agriculture is a primary means of income.
In most typical conventional loans, a 20 percent down payment toward the total amount will be required – but not in USDA loans. Because these loans are backed by the Department of Agriculture, the risk of default to the lender is virtually completely eliminated, reducing the need for a precaution like a larger down payment. USDA loans can be 100 percent financed, with zero due up front.
Compared with many other kinds of specialty loans, USDA credit requirements are relatively open. We require just a 640 minimum credit score for a USDA loan at Primary Residential Mortgage, and many lenders will even allow prior rent or outside bills to be used as payment history in some situations. If you’re close but just short of that credit score, speak to one of our brokers – we can be flexible with you as much as possible.
You want the best mortgage rates possible, and a USDA loan is a great choice in this regard. Loans are fixed rate, meaning they won’t change as the life of the loan wears on. These interest rates are generally standard across the board regardless of credit score – once you’re high enough to qualify, rates are pretty flat.
In many conventional loan situations, especially if you’re unable to pay the typical 20 percent down payment, lenders will require monthly mortgage insurance as a way to throw off some of their risk against you defaulting. With USDA loans, though, this isn’t necessary either – neither the down payment nor this mortgage insurance, which can often equal much more than the down payment over the life of the loan, are required at all.
Primary Residential Mortgage is your go-to mortgage loan company, and our brokers are standing by to answer any questions you may have about USDA loans or any of our other offerings.