Learn the Pros and Cons of USDA Home Loans

The USDA Rural Development Loan is a loan program to assist poor to moderate-income homebuyers in purchasing a rural house. However, the USDA’s definition of rural may be different from yours Most areas with a population of fewer than 35,000 people will qualify.

Is the USDA loan correct for you, though? Let’s take a closer look at the benefits and drawbacks of USDA loans.

What are the advantages of a USDA loan?

The USDA provides two kinds of loans: Single Family Direct Loans and Guaranteed Loans. The USDA offers the Single Family Direct loan directly to very low-income families. We will focus on Guaranteed loans because that is the most widely used program.

USDA Loans do not require a down payment.

The USDA loan is one of the few mortgage programs that permits you to buy a home with no down payment. This is massive because over 48% of first-time homebuyers say the down payment is their biggest obstacle.

If you were to buy a $200,000 property with an FHA loan, you’d need $7000 simply for the down payment, not including closing costs and other expenses. Using a USDA Loan allows you to save a significant amount of money by extending the area where you are willing to live.

Mortgage insurance premiums are reduced.

If you do not put 20% down on a home, you will almost certainly have to pay mortgage insurance. With conventional loans, this is known as private mortgage insurance or PMI.

This is referred to as a mortgage insurance premium by the FHA. This insurance allows you to buy a home without a large down payment, but there is a monthly cost to consider. The VA loan for active-duty soldiers and veterans is the only loan that requires no down payment and does not impose PMI. If you are in the military, you should check them out.

Except for VA, the USDA rural development loan has the lowest PMI of any credit program. A reduced PMI equates to a lower monthly payment.