The U.S. Department of Agriculture offers low down payment home loans for qualified homebuyers in rural areas.
What is a USDA loan?
USDA home mortgages are especially popular with first-time homebuyers because they require no down payment and have a 30-year term, with interest rates set at similar levels as conventional loans. They also do not require private mortgage insurance (PMI).
A conventional mortgage, on the other hand, typically requires a down payment of at least 20 percent of the purchase price. A mortgage with a down payment of less than 20 percent requires PMI, which is a fee added to a monthly premium.
A USDA Direct Home Loan Versus a Guaranteed Home Loan
You can obtain a USDA home loan either directly from the USDA, or through your local bank.
USDA Direct Home Loans:
Funded and approved directly by the USDA, with these requirements:
- Apply through the USDA online or at a local USDA service center
- Limited to those with low incomes
- The interest rate is set by the USDA at 33 or 38-year terms
- A property must be less than 2,000 square feet
- USDA Guaranteed Home Loans
USDA Guaranteed Home Loans:
Issued by local banks and backed by the USDA, with these requirements:
- Apply through your local bank
- Available to low and moderate-income buyers
- Interest rates set by your bank for a 30-year term
- No limit on property size
How To Know If You are Eligible For a USDA Loan
The eligibility requirements for USDA Rural Development loans are for buyers whose income is between 50% and 80% of an area’s median income, and you will need to provide proof of income to apply.
The home being purchased must also be located in a rural or low population area, as determined by the USDA. You can check your eligibility status at the USDA’s Single-Family Housing Income Eligibility website.
The home you’re buying must also be “modest, but also decent, safe, and sanitary” as determined by the USDA.
Apply For A Rural Development Home Loan Today
At Union Bank we can help you determine if a Rural Development Loan is right for you and walk you through the application process. We can also help you with all other types of home loans and mortgages.
You can contact us online or visit one of our 10 Union Bank branches in West Central Arkansas and the River Valley: Mena, Paris, Wickes, Hatfield, Caulksville, Clarksville, Ozark, Waldron, Booneville, and Russellville.