Let’s face it: homeownership can be expensive, but if you live in a rural area, you may be eligible for a USDA mortgage, making the dream of purchasing a home much more attainable.
USDA loans from the US Department of Agriculture (USDA) are given to homeowners in rural towns with a population of no more than 35,000. These mortgages are more affordable and come with other compelling benefits.
This blog will explain the benefits of taking out a USDA mortgage.
- No Down Payments. One of the biggest benefits of a USDA mortgage is that no down payment is required, unlike conventional mortgages, which require down payments between 3% and 20%. For many people, coming up with enough money for a down payment is one of the largest obstacles, so this type of mortgage removes that obstacle completely. Not having to spend money on a down payment frees up money for other costs associated with purchasing a home, like moving costs or lowering monthly costs.
- Lowered Mortgage Insurance. Regardless of what kind of mortgage you have gotten, whether conventional or FHA, you will need to take out mortgage insurance. However, insurance for USDA mortgages is cheaper than for others.
You can choose from these two types of insurance:
- Upfront premium: This usually amounts to 2% of the loan amount
- Annual premium: This is added to your monthly mortgage payment and amounts to 1% of the loan amount
- Low Credit Score Requirements. When you apply for a mortgage, your credit score will play a big role in determining how much credit you will get and most mortgages will require credit scores of 650 and above. USDA mortgages take a more flexible approach to credit scores and also takes into account other factors to get a full financial picture of your life. This means lenders will take a look at your debt-to-income ratio (DTI), employment history and your income. So, if you have a lower credit score but can manage your finances responsibly, your chances of qualifying for this mortgage are high.
- Competitive Interest Rates. The interest rate of your mortgage can make a big difference in your monthly mortgage costs and luckily, USDA mortgages have lower interest rates compared to other mortgages. Why? This is because the US Department of Agriculture insures the loans, so the lenders will find them less risky.
- No Prepayment Penalties. Some mortgage lenders will charge a prepayment penalty for paying off your mortgage early, whereas USDA loans do not charge these penalties. Meaning you can pay off your new home as quickly as you want.
Contact a USDA Mortgage Specialist in Oakhurst
Ready to purchase your dream home? Reach out to us at Granite West Funding to assist with applying for a USDA mortgage. Schedule your free consultation by calling us at (559) 540-2275.
