How a USDA Loan Could Be Your Answer

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A USDA home loan lets you get a zero down payment mortgage in rural and some suburban areas, and the loans are backed by the United States Department of Agriculture. This may be a great idea if you can’t qualify for a traditional mortgage or are unable to save up for a down payment.

The terms of the loans available differ as they target different income brackets, but all USDA home loans offer low interest rates and no money down options to those with decent credit.

Direct Homeownership USDA Home Loan

To meet the requirements for a direct homeowners loan, your total household income can’t exceed 80 percent of the average income. You must also meet the following criteria:

  • Have no adequate housing
  • Can afford the mortgage–including, taxes and insurance (subsidies available to some families)
  • Unable to get credit via another lender

Guaranteed Housing USDA Home Loan

This loan targets moderate-income households seeking a modest rural home. To qualify you must:

  • Show proof that income is less than 115 percent of the average for the area
  • Be able to pay the mortgage–including, taxes and insurance
  • Have a decent credit history

Rural Repair and Rehabilitation

These loans and grants help low-income people repair or improve their existing homes to eliminate safety, health and sanitation hazards. Qualified applicants make less than 50 percent of the area’s average income and can’t get an affordable loan from traditional sources.

Mutual Self-Help

This type of USDA home loan helps low-income people in rural areas buy safe, clean homes or build a new one (these families do a lot of the work to build their own homes). Eligible families bring home less than 80 percent of the average income in the area and don’t have adequate housing or the ability to get a traditional loan.