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The United States Department of Agriculture, which is also known as USDA offers qualified individuals with residential mortgage loans by purchasing a residential home in the designated rural areas. This type of a loan is also called as the rural housing loan and is available to all those homebuyers who are eligible to meet the income and housing guidelines. There are two main types of loans that are offered by the USDA under this program. These different loan types include: direct and guaranteed. Direct loans are only obtained via the USDA offices, whereas the guaranteed loans are available via eligible lenders. Both these loan types require the borrowers to meet certain income restrictions. The USDA loan program was basically designed to help homebuyers purchasing owner-occupied properties by following eligible rules of the area that have lower to moderate income levels. The eligible applications must be US residents or qualified alien citizens and purchase the property that meets all of the program requirements.

The benefits of the USDA loan include the following:

Zero Down Payment – The USDA loans allow 100 percent financing, which means that you do not have to make any down payments. This is a considerable advantage to the first-time buyers who have not had a chance to save much for the down payment.
Lower Interest Rates – Although the USDA home loan program does not require homeowners to make any down payments, the interest rates being offered are usually the same or much better than the conventional, VA, or FHA financing. Moreover, the USDA loan does not have a prepayment penalty.
Loan Terms – This program offers fixed–rate loans only. Both 15 and 30 year terms are available.
Low Mortgage Insurance Rates – The upfront mortgage insurance premium that a homeowner has to make for a USDA purchase loan is about 2 ½% of the sales price. The monthly periodic mortgage insurance cover is calculated based on one-half of 1% of the principal amount per annum.
Credit Qualifications – Property-buyers usually are required to have a 640 middle credit score to be eligible for the USDA loan. Applicants must also demonstrate that they have a stable income and environment. Moreover, the maximum debt to income ratio usually allowed is 41 percent.
The program allows for 3 percent of the sale price that is to be added to the mortgage to pay for the closing costs and practical customary expenses that are associated with the purchase of the property. Even though, the mortgage with closing costs added cannot exceed the appraised amount. For more information on these types of loans, including income restrictions and eligible areas, browse through or contact the local approved lender or the local USDA office.
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