USDA Loans: Your Path to Rural Homeownership

Loan Program Summary & Highlights

USDA loans, backed by the U.S. Department of Agriculture, are specifically designed to help low- to moderate-income families achieve homeownership in rural and suburban areas. With zero down payment options and competitive interest rates, USDA loans make it easier to afford a home while promoting growth in rural communities.

• Zero down payment required for eligible buyers.
• Competitive fixed interest rates.
• Flexible credit requirements, making it accessible to more borrowers.
• Available for properties in USDA-approved rural and suburban areas.
• Government-backed, providing added security for lenders and borrowers.

What is a USDA Mortgage Loan?

A USDA loan is a government-backed mortgage program designed to promote homeownership in eligible rural and suburban areas. These loans require no down payment, making them a great option for buyers who might struggle with upfront costs. USDA loans also feature low-interest rates and reduced mortgage insurance premiums compared to other loan programs.

USDA loans are available in two types:

• Guaranteed Loan: Offered through private lenders and backed by the USDA for moderate-income borrowers.
• Direct Loan: Issued directly by the USDA for low-income families in rural areas.

Whether you’re a first-time buyer or looking to relocate to a rural area, USDA loans provide an affordable path to homeownership with flexible terms and minimal upfront costs.

General USDA Loan Guidelines

• No down payment required for qualified buyers.
• Minimum credit score of 640 recommended, though some lenders may allow lower scores.
• Property must be located in a USDA-eligible rural or suburban area.
• Income limits apply, based on location and family size.
• Fixed-rate mortgage options only (no adjustable rates).
• Available for primary residences only.

Pros of USDA Loans

• Zero down payment: USDA loans eliminate the need for a down payment, reducing upfront costs.
• Affordable mortgage insurance: Lower premiums compared to FHA loans.
• Competitive interest rates: USDA loans often have rates similar to or better than conventional loans.
• Flexible credit requirements: Accessible to borrowers with less-than-perfect credit.
• Promotes rural development: Encourages homeownership in rural and suburban areas.

Cons of USDA Loans

• Geographic restrictions: Only available for homes in USDA-approved areas.
• Income limits: Borrowers must meet income eligibility requirements based on location and household size.
• Primary residences only: USDA loans cannot be used for second homes or investment properties.
• Mortgage insurance required: Though lower than FHA, USDA loans require an upfront and annual mortgage insurance premium.
• Property condition requirements: Homes must meet USDA standards for safety and livability.

Best Candidates for USDA Loans

• Low- to moderate-income families: Ideal for households within USDA income limits.
• First-time homebuyers: Perfect for buyers with limited savings for a down payment.
• Borrowers seeking affordable options: USDA loans feature low rates and minimal upfront costs.
• Rural or suburban homebuyers: Suitable for those purchasing in USDA-approved areas.
• Primary residence buyers: USDA loans are only for owner-occupied properties.

At One Mortgage Company, we’re here to help you explore all your options and determine if a USDA loan is the right fit for your needs. Contact us today to learn more about this affordable and accessible loan program!