EXPERT ADVICE: Why you should seek a USDA Guaranteed Housing Loan

March 9, 2012 at 11:00 am

In today’s economy, many borrowers are not looking to purchase a home due to the out of pocket expense.  Paying closing costs and putting money down is really challenging. There are programs, however, designed to help homeowners out, like the U.S. Department of Agriculture’s (USDA) Guaranteed Housing Loan program.  The greatest advantage of the USDA Guaranteed housing loan program is that home buyers can receive  up to 103% financing. This program is designed to assist low- to moderate- income homebuyers to purchase homes in rural areas and achieve their dream of homeownership.   To determine if a property is in an eligible rural area, visit the USDA website and click on one of the programs under the “property eligibility” link on the left side of the page. After you are directed to the next screen, you can type in the state or zip code to see if the property is eligible.

Why should a borrower want a USDA guaranteed loan? The term ‘guaranteed loan’ may be confusing.  Here is how the program works: an approved lender provides the funding for the loan, while USDA guarantees the loan up to 90%. USDA will allow the lender to provide up to 103% financing. Although USDA does not provide funding for these loans they do guarantee the repayment of the loans to approved lenders. Put another way, you are not guaranteed a loan. Rather, the loan funds are guaranteed to the lender should you default on your payments.  Because the government is guaranteeing the loan, USDA approved lenders are more willing to provide these loans to qualified borrowers.  The maximum loan amount is based on the county of residence and there is no purchase price maximum. USDA has flexible credit guidelines, and non-traditional credit maybe accepted.

Who is eligible to purchase a USDA home?  You must still qualify for a guaranteed loan. But the good news is this USDA product is not limited to first time homebuyers. Anyone who plans to purchase in an eligible rural area as their primary residence may apply for a USDA guaranteed loan. You must provide stable income and credit history should indicate your willingness to meet repayment options.

If you’re interested in seeing if you qualify for a USDA loan please email us. We would love to help homeowners reach their dream. Please email us at homeloans@thesupportcenter-nc.org.

Sonia Jones, Housing Resource Director

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Entry filed under: Expert Advice, Housing. Tags: , , .

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