USDA Home Loans: Eligibility and Benefits

Rural Americans can now realize their dream of homeownership, without having to go through the hassles of obtaining conventional loans that have much more stringent qualifications. The United States Department of Agriculture, or USDA, offers Rural Development Single Family Housing Guaranteed Loan Program to potential homebuyers to buy a home in any of the “designated” rural areas. This mortgage program is available for the US citizens throughout the country including Texas through USDA-approved lenders. These state-specific lenders offer attractive loan terms to the applicants; provided they fulfill the eligibility requirements. USDA home loans Texas, for example, provide financial support to potential homebuyers with low or moderate income.

Read on to learn the basics of USDA loan before you apply for it.  
  

Eligibility Criteria

• Homebuyers primarily need to meet the following two requirements to qualify for a USDA loan: They can buy a home only in a USDA-designated rural area.
• Applicant's household income must not exceed 115 percent of the area’s median.

Other USDA Qualifying Standards

•  Homebuyers should not own any other home within the commuting distance of the intended property.
• The subjected property should be a primary residence.
• Homebuyers should ideally have a sound credit history.
• There should be a two-year gap before the loan application and bankruptcy discharge.

Benefits of USDA Loan

 Zero Down Payment

Eligible USDA home loan applicants need not make any down payments. They can enjoy the flexibility of paying nothing out of their pocket during loan approval process. In addition, home buyers can finance the entire 100 percent of the property value. Besides, this type of loan allows borrowers to use a gift or grant towards the payment of their mortgage and other loan-related fees.
 

Attractive Fixed Interest Rates 

USDA mortgage lenders offer competitive and attractive interest rates to qualified homebuyers and their families on the guarantee of the USDA. These loans are available for 30-year fixed interest rate mortgages. USDA Streamline Refinance Program is another significant feature of this Rural Development Home Loan.

No Purchase Price Limit

 USDA loan program has no maximum purchase price limit. It means borrowers can receive any amount of loan. Lenders, however, determines the maximum loan limit depending on the applicant's ability to repay. An applicant’s credit history is a crucial factor to consider in making this decision.
 

Flexible Credit History Guidelines

USDA loan borrowers need to submit their credit history report to the department while applying for the loan. The credit guidelines are, however, not stringent related to credit score and debt-to-income ratio. There are times when this flexibility allows prospective homeowners even with low credit scores to qualify for a USDA home loan.
 

Conclusion

USDA loan program has become popular in the US because of its numerous salient features and benefits. The objective of the program is to encourage people to live in rural areas, and these benefits are attracting potential homebuyers with financial constraints.

Planning to Apply for an FHA Loan? Read this First!

The FHA is a mortgage loan program that is administered by the Federal Housing Administration. If you live in and around Texas, buying a home may not be a challenge; thanks to the thriving housing market of the state, and affordable home loans in Texas make living here an attractive proposition. Home loan options such as FHA have become popular among the homebuyers due to their low down payment requirement, attractive interest rates, and flexible lending regulations. If you are a first-time home buyer in Texas, an FHA loan is worth considering. However, before you apply for an FHA loan, it is essential to have some basic understanding about this financing option. On that note, let’s take a look at the finer lines of FHA home loans in Texas. 

 

Low Down Payment

One of the most attractive features of an FHA loan is that it requires just 3.5 percent down payment of the purchase price of a property. This percentage can be as high as 20 percent in the case of conventional loans. FHA borrowers have the flexibility make the down payment through gifts from family members towards the purchase of the house. Other allowed sources are grants from the state or local government down-payment assistance program.

Lenient Credit Score Requirement

People with less than adequate credit scores may qualify for an FHA loan. An FHA loan applicant, for instance, needs a credit score of 600 or more to get a mortgage with down payment as low as 3.5 percent. You need to make a minimum down payment of 10 percent if your credit score is below 600. The Federal Housing Administration allows prospective homebuyers, who have “non-traditional credit history or insufficient credit” to apply for this loan under specific circumstances. It is ideal to seek the help of a specialty mortgage firm to find out if you qualify for an FHA loan.

Closing Costs Included

If you fulfill loan-to-value (LTV) maximum guidelines, you will be able to finance a part of closing costs associated with FHA loans. You can roll out a specified amount of closing costs into your new FHA mortgage loan if your loan along with closing costs don’t exceed 96.5 percent of the fair market value (FMV) or selling price of the home; whichever is less. FHA closing costs are just like the expenses that borrowers incur on other mortgage loans. These closing costs include points, recording, title examination, title policy, and legal fees.

Debt-to-Income Ratio

If you are one of those FHA loan applicants with a high debt-to-income ratio, you may still qualify for this loan. You should, however, provide evidence that you can afford to make monthly payments. The FHA is more flexible with debt-to-income ratio limits as compared to other loans. The maximum limit of mortgage payment-to-income ratio is 29 percent while the total fixed payment-to-income ratio has a maximum limit of 41 percent.

Two-Part Mortgage Insurance

FHA loans need you to pay for two mortgage insurance premiums. The first is the upfront premium, which is 1.75 percent of the amount of the loan. This premium is often rolled into the loan amount to be paid by the lender. The second is the annual premium that you need to pay along with your monthly loan repayments. In this context, it is worth mentioning that the last FHA annual MIP rate was updated to 0.85 percent in January of 2015.

Conclusion

Now that you know almost everything about FHA loans, it is the time that you fulfill your homeownership dream. If you are looking for home loans in Texas, but utterly confused about the application process, consult a reputed mortgage consultant. A specialty mortgage consulting firm can guide you through the application process and help you secure an FHA mortgage loan seamlessly. Before applying, ask as many questions as possible to clear all your doubts.