USDA loans are special types of mortgages that are backed by the Department of Agriculture in the United States. These are a part of the program called the “USDA Rural Development Guaranteed Housing Loan”. In most instances, USDA loans are available to those home buyers that have a below-average credit rating. The USDA loans offer up to 100% financing with highly reduced premiums as far as mortgage insurance is concerned. Furthermore, USDA loans have mortgage rates that are significantly below market. Those that qualify for these loans do not have to put any money down. In many instances, USDA loans are called “Section 502 Loans”. In this brief guide, you will learn many important facts pertaining to USDA loans.
The program that governs USDA loans officially launched in the 1990s. The Housing Act of 1949 Section 502(h) makes this program possible. In total, approximately 97% of the total geographic region of the United States has land that is eligible for this loan. While most of the lenders in the United States do not list these loans on their list of available options, we here at Somerville National Bank believe it is important to inform our customers and other consumers that we offer USDA loans. These loans allow consumers that are buying a home to finance 100% of the purchase price of the property at the best mortgage rates possible. The USDA loans are highly discounted. When you obtain this type of loan, you are simply required to agree to a fixed-rate. Additionally, homeowner counseling is not a prerequisite. Best of all, both first-time buyers and repeat buyers may use USDA loans.
Mortgage Insurance is a Must
The program is only partially self-funded. This aspect of the loan is much similar to that of the FHA mortgage. As a result, the United States Department of Agriculture uses mortgage-based insurance premiums paid by homeowners to ensure that the program is allowed to continue. Despite mortgage insurance being considered a must, it is important to understand that the rates associated with the insurance payments are significantly lower than those of FHA loans and those that are similar in nature. Despite being relatively new to the nation and having a mortgage insurance requirement, USDA loans are considered to be among the most affordable of all mortgages.