NO DOWN PAYMENT? CHOOSE A USDA MORTGAGE LOAN.
If you don’t have much saved for a down payment and are willing to buy in a more rural part of South Carolina, then a USDA mortgage loan could help you buy a home.
Want to learn more about these no-down-payment mortgages or see if you qualify for one? Read on below or reach out to Kelli Jacobson at Premier Nationwide Lending of Lexington today.
WHAT ARE USDA MORTGAGE LOANS?
USDA mortgages are home loans that are backed by the U.S. Department of Agriculture. They’re designed to spur settlement of more rural, undeveloped parts of the country and are only available in certain eligible locations. To see if a property you’re thinking of buying would qualify, check the eligibility tool at USDA.gov now.
WHY USE A USDA MORTGAGE LOAN?
The main reason you’d want to use a USDA mortgage loan is to avoid paying a down payment. USDA loans require zero down, and you can finance your entire home purchase with them. On top of this, you can also roll your closing costs into the loan balance, which lowers your up-front costs of homebuying even more.
Another perk of USDA loans is their low interest rates. Because these mortgages are guaranteed by the government, mortgage companies are able to offer extremely affordable rates without added risk or cost.
Advantages of USDA loans:
- Zero down payment required
- Closing costs can be rolled into the loan balance
- Zero prepayment penalties
- Zero limits on cash contributions
- Lower private mortgage insurance than FHA loans
USDA loans aren’t without their disadvantages, though. For one, they can only be used in certain parts of the country, and they also can’t help finance an investment or vacation property purchase. Additionally, USDA loans require private mortgage insurance, which adds both an up-front cost and a monthly fee to the equation.
Another downside is that not all mortgage companies offer USDA loans. You’ll have to use a USDA-approved mortgage lender in order to apply for a loan.
Disadvantages of USDA loans:
- Only available in certain geographic locations
- Only available for primary residences
- Only an option for borrowers under a specific income threshold
- Requires private mortgage insurance, both up-front and monthly
- Usually require at least a 620 credit score
WHO ARE USDA MORTGAGE LOANS RIGHT FOR?
USDA loans are designed with low- and middle-income earners in mind. In order to qualify, you can’t make more than 115 percent of your country’s median household income. (Use this tool to see if your income qualifies).
Additionally, the home you’re purchasing must be in a designated rural area. You can check the eligibility of a property you’re considering at USDA.gov.
Finally, you’ll also have to meet certain credit and debt-to-income ratios, though these vary across mortgage companies. You can generally expect to need at least a 620 credit score in order to qualify for a USDA mortgage loan.
ARE YOU THINKING OF USING A USDA LOAN?
If you’re open to buying a home in a more rural area of South Carolina, then you might want to consider a USDA loan to help you finance it. Not only can USDA loans eliminate costly down payments from the equation, but they can also significantly reduce your up-front costs of homebuying by rolling your closing costs into the loan. This allows you to pay them over time and, in many cases, even buy a home sooner than you’d originally expected.
Do you want to learn more or get prequalified for your USDA loan? Then get in touch with Kelli Jacobson at our Lexington office today. We’re here to help.