A USDA mortgage is a type of mortgage loan offered to rural property owners by the United States Department of Agriculture (USDA) Rural Development Guaranteed Housing Loan Program. Here are some key features of a USDA mortgage:
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Zero down payment: USDA loans require no down payment, meaning that it is possible to finance up to 100% of the property value.
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Low mortgage rates: USDA home loans often have lower rates than conventional mortgages because the government is taking on the risks associated with lending.
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Income restrictions: One must meet the income restrictions for the county in which the buyer is interested. Each county has a maximum income requirement.
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Eligibility: USDA loans are available for homebuyers in eligible towns and rural areas.
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Types of USDA loans: There are two types of USDA loans: guaranteed and direct. The guaranteed loan program allows approved mortgage lenders to provide 30-year fixed-rate USDA loans to borrowers within certain income thresholds in specific USDA-eligible locations. The direct loan program provides payment assistance to low- and very-low-income applicants obtain decent, safe and sanitary housing in eligible rural areas.
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Loan funds: Loan funds may be used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.
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Drawbacks: Some drawbacks of USDA mortgages are that the property must be located in a USDA-approved area and borrowers cannot exceed income limits.
