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What is a USDA Loan? Do You Qualify?

USDA Loans

USDA LoansTexas homebuyers have plenty of housing options, from sky-high apartments right in the heart of downtown to quaint townhomes in one of the Dallas suburbs. Even more options exist when you consider financing options. One loan type that many homebuyers overlook is USDA loans. These loans are particularly beneficial to those who want to purchase property in one of Dallas’ more rural neighborhoods. We’ll help you learn about USDA loans and how you may qualify for them below.

What Is a USDA Loan?

USDA loans are 30-year fixed-rate mortgages guaranteed by the United States Department of Agriculture that allow low- to moderate-income homebuyers to purchase homes in rural and eligible suburban areas with zero down payment and below-market interest rates. Homeowners who qualify may use USDA loans to refinance their homes at a lower interest rate.

What Are the Types of USDA Loans?

Three types of USDA loans exist:

  1. Loan guarantees: Loans issued by participating local lenders are backed by the USDA, reducing the loan’s interest rates. These loans provide a 90% loan note guarantee to participating lenders. Individuals enjoy a zero-down payment in most cases.
  2. Direct loans: The USDA issues these loans specifically for low- and very-low-income applicants. Income limits vary by state. Income thresholds vary by region. These loans feature a zero-down payment, and interest rates can be as low as 1%. 
  3. Home improvement loans and grants: These loans or grants can support home repairs and upgrades. Homeowners can receive up to $27,500 in financial assistance.

How to Qualify for a USDA Loan

To qualify for a USDA loan, borrowers must meet the eligibility criteria:

  • A borrower must be a U.S. citizen or permanent legal resident.
  • The property must be in a designated rural area. The USDA defines a rural area as an area with fewer than 20,000 people.
  • You will use the property as your primary residence. Even though the property is in a rural area, the property owner cannot use it as a working farm. The property also cannot serve as an investment property or vacation home.
  • Your income falls within the USDA income limits. Generally, your income for moderate-income programs cannot exceed 115% of the U.S. median household income.
  • A borrower must have a minimum credit score of 640.
  • A borrower must have documented income for the last 24 months.
  • An individual must have a debt-to-income ratio of 41% or less.

Can low and very low-income borrowers qualify for this loan? They can if they are without decent, safe, or sanitary housing and cannot secure a loan from traditional sources. Additionally, they must have an adjusted income at or below the low-income limit for the area where they live. These loans are for homes with less than 2,000 square feet.

Contact The Tuttle Group Today

The Tuttle Group is your Dallas, Texas, mortgage broker offering various home loan products, including USDA loans, conventional home loans, and jumbo loans. Our team of experienced loan agents can provide you with outstanding customer service and competitive rates. Call us at 972-846-8115 or contact us online today to discuss your mortgage options.

 

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