Unconventional home loans

All About USDA Loans

The United States Department of Agriculture (USDA) offers several different loan types aimed at helping homeowners buy farm property. USDA loans are an affordable option for many families, since most require little or no money up front and credit score requirements are less stringent than they would be for a traditional loan. Your eligibility for a USDA loan will depend on where you live and the size and price of the property you are interested in buying. Is a USDA loan right for you? Here are a few key details that can help you decide:

• Loan Types – There are two different loan programs offered by the USDA. The first is a direct loan program, where the agency directly funds the applicants and payments are made to the USDA. The second is a loan guarantee program, similar to the program used for federal student loans, where the USDA guarantees the loan with a conventional lender or bank. The loan that you qualify for will depend on your income and the property you are buying; each loan type has its own standards and guidelines.
• Property – USDA loans are designed to build and promote rural communities, so the location of the property will determine if it is eligible for a loan. Many rural properties are covered in the program, so even if the home you are considering is not a farm, you should still check the USDA property eligibility map to see if your home qualifies – the results may surprise you.
• Income – The amount of income you need to qualify for a USDA direct or guaranteed loan may be different from the amount you need for a traditional loan. The USDA government site has a calculator you can use to determine your eligibility; it uses the amount of income you earn, the number of people in your household, and the average income in your property search area to determine if you are eligible.

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