What is a USDA Loan?

The USDA (United States Department of Agriculture) developed a program in 2014 that gave close to $20 billion to almost 150,000 families so they could purchase home and repair or improve them as well. The loan itself if available for people that live in rural areas. The advantages of a USDA loan are that it is 100% guaranteed, you can also receive low interest rates and no down payment is necessary.

Types of USDA Loans

There are 2 different types of USDA loans. Direct and home improvement.

Direct Loan: The purposes of these loans are to offer assistance in financing a home for low-income families or individuals. The loan money can be used to finance anything around the house including renovations, repairs, building a home. To qualify for a direct loan, the borrower must have low or very low income. The individual or family must be without proper housing, but still be able to make the mortgage, tax and insurance payments. 

Home improvement loans and grants: The purpose of this loan is to help finance home improvements to improve the safety and health of the home. They are offered to low-income individuals or families to help them improve their condition of living by repairs or updates. To qualify for this loan or grant, the borrower must have low to very low income. They must be making repairs to improve the safety and health hazards that may be present in the home.

Specific Qualifications for a USDA Loan

• The borrower must be a United States citizen or have permanent residency in the state.
• Required to make monthly payments that include interest payments, insurance payments, principal payments and tax payments.
• Proof of a steady income for a minimum of 2 years.
• Decent credit history. Usually borrowers with a credit score higher than a 620 will have an easier time obtaining the loan. Anyone below a 580 will have more strict standards but can still obtain the loan.

Obtaining a USDA Loan

Applicants must speak with a participating lender to obtain more information about a USDA loan. You can contact the USDA office in your state to find out more about qualifications and see if you or your family qualifies for one of the two loans. These loans are for people in rural area that have low income and need repairs or renovations to make the home safer and healthier, home building or home buying for people with less than adequate housing.