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USDA Loan Purchase

Maybe you're looking to leave the pavement for greener pastures. If so a USDA loan might be right for you.

Overview: USDA Home Loans

Certified Lean Home Loans

A USDA home loan is a zero down payment morgage for eligible rural and suburban home buyers, and might be one of the government’s lesser-known home loan assistance programs, also being one of the better government backed loans if you qualify.

USDA loans are issued through the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, by the United States Department of Agriculture.

The main benefits of a USDA loan are:

This loan is offered requiring no down payment. Zip. Zero. Zilch. The fact that the USDA loan program allows home buyers to achieve 100% financing is without a doubt the greatest benefit of getting a USDA loan
Because a USDA loan is insured by the U.S. Department of Agriculture, you'll be offered a low, extensive interest rate that doesn't vary based on your credit score or down payment, as it does with conventional financing
Private Mortgage Insurance (PMI) is required for any loan with less than 80% loan-to-value (LTV), regardless of the loan program. A USDA loan’s PMI rate is the lowest of any loan program and won't change based on your down payment
USDA Dirt Road

ARM VS. fixed: Which should I choose?

A fixed-rate mortgage has the same interest rate through entirety of the loan. Your monthly payment of P&I (principal and interest) won’t change. A fixed-rate mortgage is one of the most popular types of financing because it offers stability and predictability for most peoples budget.

An adjustable-rate mortgage, commonly referred to as an 'ARM', is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down. In general, the initial interest rate is lower than that of a fixed-rate mortgage. After the fixed-rate period ends, the interest rate on an ARM loan moves based on the index it’s tied to.

When deciding if a fixed or ARM rate is right for you, there are some questions that you need to ask yourself:
1. How long do I plan on staying in the home?
If you’re only going to be living in the house for a few years, it would make sense to take the lower-rate ARM. Your payment and rate will be lower, and you can build savings for a bigger home later on. Also, you’ll never be exposed to huge rate adjustments of an ARM because you’ll be moving before the adjustable rate period begins.
2. How frequently does the ARM adjust, and when is the adjustment made?
After the initial, fixed period, most ARMs will adjust every year on the anniversary of the loan. The new rate is actually determined by the index value around 45 days before the anniversary. But some adjust as frequently as every month. If that’s too much volatility for you, it might be better to go with a fixed-rate mortgage.
3. What’s the interest rate environment like?
When rates are relatively high, ARMs can make sense because their generally lower initial rates will allow you to still reap the benefits of home ownership. When rates are lower, you have a decent chance of getting lower payments even if you don’t refinance. When rates are relatively low, however, fixed-rate mortgages make more sense.
4. Can you still afford your monthly payment if interest rates rise?
On a $150,000 sing year ARM mortgage with 2/6 caps, your 5.75 percent ARM could rise to 11.75 percent, with the monthly payment rising up as well. Generally, when fixed mortgage rates are low, fixed mortgages will tend to be a better deal than an ARM, even if you plan to stay in your home for only a few years.

How do I qualify for a USDA Home Loan?

Not only will you have to qualify but the home you’re looking to buy will also need to qualify. The department has a rural property lookup tool that lets you enter an address to find out whether the home is eligible for a USDA loan. Income limits to qualify for a home loan guarantee will vary by the location and will depend on the size of the household. To find the loan guarantee income limit for the county where you live, check out the USDA table.

USDA guaranteed home loans are only for owner-occupied primary residences. Other eligibility requirements include:

U.S. citizenship (or permanent residency)

Reliable and consistent income, usually for a minimum of 24 months

A monthly payment — including principal, interest, insurance and taxes — that’s 29% or less than your monthly income. Other combined debt payments payed monthly you make cannot exceed 41% of your income. However, the USDA will consider higher debt ratios if you have a credit score above 680.

An acceptable credit history, with no accounts converted to collections within the last 12 months, among other benchmarks. If you can prove that your credit was affected by circumstances that were outside of your control or temporary, you may still qualify.

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