USDA Mortgages: Their History and How They Work
The Goal of the USDA Mortgage Program is to “Help improve the economic and quality of life in rural America.” They do this through loans, grants and guarantees. They promote economic development by offering loans to business and homeowners. The USDA has a portfolio of $216 billion dollars and guarantee over $38 billion dollars in loans each year.
The US Housing Act of 1949 created what would become the first consumer USDA rural home loan program. This new program then placed direct responsibility at the USDA for appropriating funds. USDA mortgage financing was initially used for on-farm housing, however non-rural farm financing was eventually added in order to round out the programs coverage.
To qualify for a USDA Mortgage you must:
· Make sure the property in located in an eligible area.
· Have a qualifying credit score. Typically, most lenders require a mid-credit score of at least a 640.
· Meet the income requirements. You not only need to make enough income to satisfy the income requirements, but this program does put a cap on how much you can make.
· Meet the property requirements. USDA has property restrictions.
· Reside in the property as your primary residence
Some of the advantages of the program are as follows.
· 0% down payment
· Lower fees when compared to programs such as FHA and some Conventional programs
· Lower credit score requirements. Some conventional loan programs require scores of 680 or higher, with a USDA loan you can have a 640 score and still qualify.
· More flexible income requirements.
Streamline Refinance Option
The USDA also has a streamline refinance program. Similar to that of the FHA Streamline Refinance. It is designed to help lower interest rates and help home owners save money. To qualify you typically need to:
· Reside in the property as your primary residence.
· Make 12 months mortgage payments on time.
· Presently have a USDA mortgage.
To find out more or to see if a USDA mortgage is right for you I can be reached at 860-334-1353 or email [email protected]