USDA Loan Benefits and Features
The USDA Loan is an appealing option for financing homes in designated rural areas and offers significant advantages.
Major Benefits
- Zero Down Payment: Most borrowers are not required to make a down payment.
- No Private Mortgage Insurance (PMI): Instead of PMI, borrowers pay a small upfront fee (1.0% of the loan amount, which can be financed) and a low annual fee (0.35%) included in the monthly payment.
- Attractive Rates: USDA loan interest rates are highly competitive, often matching or beating conventional rates.
Key Requirements
- Income Limits: Eligibility depends on meeting low, very low, or moderate family income limits defined by the USDA for the area, and having a dependable income source.
- Property Location: The home must be located in a USDA-designated rural area (generally, a population under 35,000) and must be the borrower's primary residence.
- Borrower Status: Applicants do not need to be first-time homebuyers or work in agriculture, but must be U.S. citizens or permanent residents.
The loan requires an escrow account for property taxes and insurance and requires the property to be appraised by a USDA-approved appraiser.
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