No Farm Required: Surprising Facts About USDA Loans

Nearly everyone has dreams of owning their own home. Like many, writing that rent check every month doesn't seem to be getting you any closer to your goal, and you are unable to save enough for a down payment on a home of your own. You should know that two little-known government-sponsored loan programs were created just for people who have very little or no money for a down payment on a home. If you are tired of spending money for a rental that belongs to someone else, read on for more information about these loan programs.

Location Matters

The loan programs sponsored by the United States Department of Agriculture (USDA) were created primarily to encourage home ownership in less populated, rural areas. However, don't be misled into assuming that the eligible areas are all rural farms. As the map shows, suburban areas near large cities fall into eligible areas, as well as entire sections of some states. You can enter an exact address on the map for eligibility status or just browse the areas you are interested in, zooming in if needed. The eligible areas appear as shaded on the map.

The Direct Loan Program

The USDA Section 502 Direct Loan Program comes with the amazing perk of requiring a 0% down payment. The ability to get a home mortgage with no down payment is only available through one other loan guarantee program, the Veteran's Administration Loan Program. You must have what the USDA classifies as very low-to-low income to qualify for a Section 502 Direct Loan, which varies according to state and then county.

The Guaranteed Loan Program

If your income is a little too high to qualify for the Section 502 Direct Loan Program, the Guaranteed Loan Program may be a better fit for you. This program targets people with low-to-moderate incomes. One major difference in the Guaranteed Loan Program and the 502 Direct Loan Program, besides allowing higher incomes, is that a 10% down payment is required for home purchases, still far less than traditional loans.

What Does the Guarantee Mean?

The word "guarantee" when associated with these loans can be somewhat confusing to some. These loans are guaranteed by the USDA for the lenders; meaning that if you fail to pay the loan, the government will reimburse the lender. It doesn't mean that you are guaranteed to be approved. However, the guarantee is still good news for home-buyers because lenders could be more likely to make loans that they know the government is backing.

These programs can be the answer to your hopes and dreams of becoming a homeowner. For more information, contact Ebh Properties Inc. or a similar company.


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