What Is a USDA Mortgage?
The United States Department of Agriculture (USDA) administers a mortgage program to help low income families purchase housing in rural areas. The USDA loan is easier to qualify for than many conventional loans and mortgages and can be used to purchase, build or rehabilitate a home.
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Eligibility
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USDA mortgage applicants must be able to prove that they have adequate financial resources to repay the loan and must have what the US Department of Agriculture terms a "reasonable" credit history. Although USDA mortgages are meant to help low income families, borrowers can make up to 115 percent of the median income for their area and still qualify. In addition to these requirements, the house being financed must be located in a qualified rural area.
Benefits
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Unlike other mortgage loans, the USDA program does not require borrowers to make a down payment. In addition, closing costs can be rolled into the loan, completely eliminating the upfront costs of buying a home. Other USDA mortgage benefits include low interest rates and the ability to pre-pay the mortgage without penalty. USDA mortgage holders are not required to carry mortgage insurance.
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Building Standards
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A USDA mortgage loan can be used to buy, construct or rehabilitate a home. Regardless of the option chosen, houses financed with a USDA loan must meet both the state building codes and the USDA's Housing and Community Facilities Program (HCFP). New manufactured housing must also meet the safety standards established by the United States Housing and Urban Development Authority (HUD).
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References
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