Section 3: USDA Loan Benefits
USDA Loan Benefits
The USDA loan is one of the most beneficial programs for homebuyers wishing to purchase a home outside of densely populated areas. Designed to help rural and suburban Americans achieve the dream of homeownership, the USDA loan comes loaded with benefits that open the doors of homeownership to many who may not otherwise qualify for conventional home financing. USDA loans offer a number of advantages over other mortgage options, largely because the USDA guarantees all loans against default. This means that lenders can take on more risk and offer homebuyers favorable loan terms.
1. Flexible Credit Guidelines
Most conventional lenders look for a credit score of at least 640, however you'll need something closer to 720 to qualify for the lowest interest rates. Luckily, there is no minimum credit score for USDA loans, however you need a score of 640 or higher to qualify to use the USDA's automated underwriting system. Borrowers with lower credit scores can still qualify for USDA loans using manual underwriting.
2. Down Payment
Of the many advantages, the most cited is the ability to obtain 100 percent financing without having to spend years saving for a down payment. Along with VA loans, this government-backed loan option is one of the last remaining $0 down payment mortgage options out there.
4. Private Mortgage Insurance (PMI)
With a conventional loan, lenders require you to pay "private mortgage insurance" (PMI) if you don't come up with a 20 percent down payment. FHA loans also have high annual mortgage insurance fees.
USDA loans, on the other hand, don't have PMI. Instead the USDA uses two fees: an upfront guarantee fee that is paid once when you close on the loan, and an annual fee, which gets lumped into your monthly mortgage payment. The upfront fee is 1 percent of the total financed amount while the annual fee is 0.35 percent of the loan's current balance.
3. Competitive Interest Rates
Due to the USDA guarantee, lenders are able to offer some of the lowest interest rates on the market. While actual rates will vary by lender due to other contributing factors, know that your credit profile and current market conditions play a vital role in your mortgage rate.
4. Lifetime Benefit
While this benefit only applies in certain circumstances, it is possible to own additional property and apply for a USDA loan. The main thing to keep in mind is that the other property cannot be financed by a previous USDA loan. USDA loans get you into one of the best loans which you will be able to use and benefit from for the rest of your life.
5. Loan Limit
Loam limits will be determined by your county. To find out more information please reach out to your lender (CLICK)
6. Funding Fee
USDA loans have the lowest funding fee of all government-backed loan products. 1% Upfront Funding Fee 0.35% Annual Fee . Funding Fee
The maximum amount you can be charged for a USDA guarantee fee is 3.5% of the loan value. In 2019 this fee is set at 1% and is calculated based on the loan amount.
7. Assumability
If you're wondering if USDA loans are assumable, the answer is often yes. USDA loan assumption can make a lot of sense, particularly in a high interest rate environment, provided you qualify and that it makes financial sense for your personal situation.
Common Questions on Conventional Loans
- Are USDA loans better?
Everyone has unique needs for their buying situation. Although USDA loans are very competitive, they are not always the best choice for the consumer. Because of that we recommend you talk to your loan professional for your specific needs.
- Are there any benefits to sellers?
USDA loan buyers have the lease restrictions when it comes to buying and is typically a sought-after product when looking at offers.
- What are Orbit Realty’s and Orbit Home loans benefits?
With Orbit Realty you and Orbit home loans you get the benefit of working with a team that is highly trained and qualified. Okay, maybe every company says they have that, but the truth is that only 10% of companies nation-wide have both a real estate and mortgage company combined and because of that we are able to be one of the most competitive lenders on the market. We are also able to pass savings onto you buy not having to change additional fees that you often see with other lenders.
For more information on how we can help you please click the link below (CLICK)