Duke Team of Remarkable Home Loans

     USDA home loans are a great option for eligible borrowers looking to purchase a home in certain rural or and even suburban areas. These loans are backed by the U.S. Department of Agriculture and offer several advantages over other types of home loans. Here's what you need to know about USDA home loans.

     One of the main advantages of USDA home loans is that they offer a zero down payment option, which can be very attractive to borrowers who don't have a lot of money saved up for a down payment. This means that eligible borrowers can finance up to 100% of the purchase price of their home with a USDA loan. However, keep in mind that some closing costs and fees may still need to be paid out of pocket.

     To be eligible for a USDA home loan, the property being purchased must be located in an eligible rural or suburban area. The USDA provides an online tool (https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp) that can help borrowers determine whether a property is located in an eligible area. Additionally, borrowers must meet certain income requirements based on the area in which they are purchasing the home.

     While there is no specific credit score requirement for USDA loans, borrowers with higher credit scores may be more likely to be approved for the loan and may receive more favorable terms. Additionally, borrowers must have a debt-to-income ratio of 41% or lower, which means that their monthly debt payments (including their mortgage payment) should not exceed 41% of their monthly income, while at the same time a borrower's household income must not exceed income limits set by the USDA regarding family size and area of the country. Area income lookup (https://www.rd.usda.gov/sites/default/files/rd-grhlimitmap.pdf) and income tool (https://eligibility.sc.egov.usda.gov/eligibility/incomeEligibilityAction.do?pageAction=state)

     USDA loans also requires annual (paid in monthly installments with your mortgage payment) mortgage insurance, which is similar to the private mortgage insurance (PMI) required for conventional loans. However, the cost of USDA mortgage insurance is typically lower than the cost of PMI, which can make USDA loans more affordable for borrowers. There is also, like FHA loans, an upfront mortgage insurance premium, typically 1.01% of the loan amount, that is financed into the loan and paid over the life of the loan as part of the principal and interest portion.

     USDA home loans offer several advantages for eligible borrowers, including a zero down payment option, affordable mortgage insurance, and flexible credit and income requirements. However, it's important to note that these loans are only available in certain rural and suburban areas, and borrowers must meet certain income requirements. If you're considering a USDA home loan, be sure to work with a knowledgeable lender who can help you understand the eligibility requirements and the costs and benefits of this type of loan.