If you’re looking to buy a home in a suburban or rural area and have little or no down payment, consider a USDA Rural Development Loan. This can be a great option if you’re a first time home buyer or want to further away from a large, urban area.
However, this doesn’t mean your new home will be on a long, winding country road with your nearest neighbor a mile away (unless you want it to be). While many homes in the greater Chicagoland suburbs and Rockford are not eligible, many suburban areas fall in a designated USDA Rural Development area. Many smaller towns and villages meet the rural eligibility requirements, including Genoa and Marengo.
What is the USDA Rural Development Loan Program?
A USDA Loan is a specialized mortgage program for low- to moderate-income individuals purchasing existing homes or building new homes in rural areas. These individuals may face financial barriers to homeownership including little to no credit history, a subpar credit score, or lack of funds for a down payment. While this type of loan does not require a down payment, the home being purchased must be the homebuyer’s primary residence. Additionally, the borrower’s mortgage principal, applicable taxes, insurance, and interest must be less than 29 percent of the homebuyer’s monthly income.
The USDA Loan was created as part of the United States Department of Agriculture’s Rural Development program. The goal of the initiative was to help improve the quality of life for those living in rural settings in the United States and to help stimulate economic development in these areas.
What Are the Benefits of a USDA Rural Development Loan?
No Down Payment Requirements
A majority of home loans require a minimum down payment, ranging anywhere from 3.5 to 20 percent, depending on the financing option you’re interested in. Other factors in determining down payment may include your credit score, debt-to-income ratio, and employment history.
A USDA Loan does not require you to put any money down toward a home purchase. This eliminates the home-buying barrier for many borrowers, as they don’t need to worry about saving for a down payment to qualify for a loan. Any money saved for a home purchase can then be used for moving costs, home improvements, or other expenses.
More Lenient Qualifications
A USDA loan is often more forgiving than other loans, especially when it comes to credit and credit scores as there is no set credit range for qualifying. If you meet the other eligibility requirements, such as home location and income, you have a strong chance of being approved for a loan even with a lower credit score.
PMI Is Not Required
Private Mortgage Insurance (PMI) is designed to protect the lender if you default on your home loan. It is usually required on conventional loans when the down payment is less than 20 percent of the home’s purchase price. USDA loans, however, do not require PMI. These specialized loans include an upfront and annual form of mortgage insurance, making the mortgage insurance cost significantly lower as compared to conventional loans according to USDALoans.com.
Lower Interest Rates
USDA loans generally have lower interest rates than comparable 30-year fixed mortgages, saving borrowers money throughout the life of the loan. With lower mortgage insurance rates and minimal to no down payment, a USDA loan may be your best bet as compared to conventional or FHA loans.
If you’re wondering if you qualify for a USDA loan, Pacor Mortgage is here and always eager to help. We have been helping individuals finance their dreams since 1986. We would be honored to be a part of your home buying story. Contact us at 773-881-7744 or visit our website to learn more!
2020 Pacor Mortgage Corp. Pacor Mortgage Corp is located at 14930 Cicero Ave, Oak Forest, IL 60452, Phone 773-881-7744 (Unique Identifier #120945). For Licensing information, go to: www.nmlsconsumeraccess.org. Pacor Mortgage Corp is an equal housing lender and is licensed by the Secretary of State under the Illinois Residential Mortgage Lending Act and is assigned Illinois Residential Mortgage License MB.0000892. Pacor Mortgage Corp branches operate with the following licenses and is assigned Illinois Residential Mortgage License MB.0000892-001, with a Wisconsin License # 260345BA, Palos Heights NMLS 261297 and is assigned Illinois Residential Mortgage License MB.0000892-008, Colorado, Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act, California license # 41DBO-67516, Florida MLD1075, Indiana DFI 13177, Maryland 23528, Michigan FL0828, Michigan SR1130, Minnesota MN-MO-120945, North Carolina L-184546, Ohio RM.804151.000, Pennsylvania 43855, South Carolina, MLS – 120945, Wisconsin 120945BA, Kalamazoo, MI NMLS 120945 also DBA Lake Pacor Home Mortgage. This is not an offer for an extension of credit, a rate lock or a commitment to lend. All loans must satisfy company underwriting guidelines and any investor overlays. Any of the advertised products may be discontinued at any time. Information and pricing are subject to change at any time and without notice. Loans are being committed and closed at expressed rates although these rates change and may not be available at time of your lock in, commitment and / or closing. Pacor Mortgage Corp is not affiliated with your current lender, nor is it an agency or extension of the Federal Government, Fannie Mae, Freddie Mac or HUD.