Deciding Which Loan To Take Out

As soon as I realized that my personal financial picture was a little bleak, I started thinking about taking out a personal loan. I wasn't really looking forward to going into debt, but I knew that if I wanted to solve a few short-term problems, a loan would be the way to go. I talked with a few of my local financial institutions to get a good idea of what they could offer me, and then I sat down to go over the paperwork. It was incredible to see how much money I could save by securing a lower interest rate. Check out my blog for more information about loans.

4 Things Every First Time Home Buyer Should Know About USDA Home Loans


If you're in the market for your very first home, chances are you are having a hard time finding a mortgage. Either you can't get approved for a loan or you simply don't have the money to put down on the house. The housing market isn't very friendly to people right now, so you may think that you might be out of luck. Fortunately, there is another way. A U.S. government program is out there that can not only get you a loan on a brand new home, but also make things easier when it comes to managing it financially.

What Is a USDA Home Loan?

If you've never heard of a USDA home loan, you're not alone. It isn't a type of loan that crops up much in the industry. Essentially, this type of loan was designed for farmers and individuals that live in rural areas. The U.S. Department of Agriculture created this type of loan to help these individuals finance a multitude of properties while paying an extremely low interest rate.

This loan was also designed to cover minor repairs on any property that you purchased using the loan. So, you're not a farmer. Don't worry, "rural" isn't as literal as it sounds.

Not So Rural After All

Basically, the rural nature of the loan can include anything from a big yard to a gardening development project that you have undergone. In fact, the current state of the loan prohibits anyone from purchasing property for the intended use of starting up an income-producing agricultural farm.

Also, the loan is not specifically intended for purchase of a home. It can also be used to relocate, renovate, repair, or even refinance a home.

How to Get Approved for a USDA Home Loan

To qualify for a USDA home loan you must first meet the specific requirements regarding your income and credit score. For example, you cannot make more than 115% of the average income in the area in which you choose to reside. You are also prohibited from spending more than 41% of your total income on your debts.

Your credit is extremely important because it will ensure that you are reliable for the 30-year fixed mortgage that will always come with this type of loan. Your credit score must be at least 660, and you must have some cash in your account before closing on the property.

Also, remember that the home must be approved by the Local Rural Development office as existing in a rural area. Make sure that you do not own a property that is in commuting distance of the home you which to purchase. If you do, you will not be approved.

All About Financing

The major draw for this loan is that the financing is at 100%. This means that you will not have to put any down payment on the loan before signing. Because the interest rate is non-existent, you will not be paying for mortgage insurance every month, either. This is possible because of a 3.5% USDA Guarantee Fee that is paid to the government for funding of the program.

Another great thing about this loan is that there are no pre-payment penalties. Essentially, these penalties occur when an unsuspecting home buyer decides to try and pay off his or her mortgage earlier than expected. In a traditional mortgage, this would mean less interest for the entity that gave out the loan, creating penalties for the homeowner.

This financing is extremely attractive because of its beneficial nature to low-income families, but don't keep the rose-colored glasses on too tight. Remember to ask for this loan, but also know that some lenders may not sell you the home because the guarantee on their investment is smaller than a traditional mortgage.

There you have it. Your income status doesn't have to be the determining factor for getting your very first home. Once you understand all of these things regarding USDA home loans and talk to a place like USDA Loans, you will be one step further towards moving in day.


9 October 2014