6/22/2017 0 Comments Types of USDA Loans: A Brief GuideIf the thought of spending life in a city doesn’t appeal at all, and you always want the place you call home to be surrounded by pastures, you might be eligible for a USDA loan. The Department of Agriculture offers mortgage assistance programs through Texas home loan and mortgage company to improve the economy and quality of life. Launched with an initial investment of almost $20 billion 2014, USDA loans have helped more than 140,000 families to buy their own house. In this blog post, we discuss three types of USDA loans offered under the Rural Development program. Read on. 1. Single Family Guaranteed Loans The loan applicant doesn’t need to make any down payment, and can use this loan to rehabilitate, refinance, buy or improve the existing property. The interest rate is lower than FHA and conventional loan, but to qualify, it is required to apply for loan in a rural area that has a population less than 35,000. The applicant also need to take mortgage insurance. Other expenses include, 2 percent upfront MI fee to be paid at closing and 0.40 percent fee, which is based on the remaining principal balance to be paid annually. 2. Single Family Direct Loans These loans are basically subsidized grants to reduce the mortgage payment to 1 percent for some time. When the title of the property is transferred, or the borrower no longer lives in the house, it is necessary that borrower repays all or certain portion of the subsidy received over loan tenure. No down payment is required, and to qualify for a direct loan, the borrower needs to show inability to secure a loan from other lenders on reasonable terms and conditions. 3. Single Family Housing Repair Loans and Grants The loan is offered to very-low-income homeowners who want to improve or repair their house. The elderly very-low-income homeowners also get grants to remove any health or safety hazard from the house. The maximum limit for loan is $20,000 and grant is $7,500. The applicant may ask for a combined assistance of loan and grant with maximum limit of $27,500. The rate of interest for loan is 1 percent and payback time is over 20 years. The applicant needs to own and occupy the house. The family income should be less than 50 percent of the median income of the area. Way Forward Talk to a participating lender to apply for USDA home loan. If you want USDA direct mortgage or home improvement grant or loan, get in touch with the USDA office in your state. The loan applicants who have credit score of 620 or more get faster approval, and those with credit score below 580 need to meet stringent underwriting standards to get the approval.
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USDA loans are offered to rural and suburban property buyers at low interest rates. Homeowners can also get a USDA loan for home improvements. These loans are backed by the U.S. Department of Agriculture and disbursed by recognized private lenders. Despite the many advantages of USDA loans such as attractive interest rates and low monthly mortgage insurance, many homeowners have skewed or limited knowledge about them. To help spread awareness about USDA home loans, the post discusses some useful info about them. Take a look.
Types of USDA Loans Guaranteed Loan Guaranteed loans can be raised by households whose income is up to 115 percent of the median income for the area. The loan is provided to borrowers who don’t have a residence but can afford the mortgage payments. Before applying for a Guaranteed Loan, borrowers must check the Maximum Household Income limits set by their county to determine eligibility. As is the case with other USDA loans, borrowers would be required to pay an upfront funding fee of 2.75 percent of the purchase price. Direct Loan Direct Loans are provided to applicants who fall in the very low or low income category (low: between 50-80 percent of the median income for the area, very low: below 50 percent of the median income for the area). A Direct Loan can be used to build, repair, renovate, and relocate a home. Though, borrowers must have a reasonable financial standing to afford mortgage payments, they can be eligible for payment subsidies. Rural Repair and Rehabilitation Loan Rural Repair and Rehabilitation Loans are provided to senior homeowners (age: 62 years or more) who fall in the very low income category. Borrowers can use the loan amount to finance necessary repairs, and renovations that can help address safety and hygiene issues. These loans are provided to homeowners who are unable to secure credit elsewhere. Pros and Cons of USDA Loans Benefits
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Conclusion Easy payment plans, zero down payment, and flexible qualifying criteria make USDA loans one of the most accessible government loan programs. Though borrowers are required to get mortgage insurance, they can finance the cost into the loan which helps in lightening the payment obligation. Individuals looking to raise a USDA loan must visit USDA’s official site before applying for a loan as the eligibility criteria keeps on changing every year. While most people in US continue to relocate to urban areas, there is a vast majority that lives in rural areas. In fact, to encourage and help people secure a home in rural areas, the United States Department of Agriculture (USDA) offers loans to individuals from low and medium income groups. The USDA partners with local lenders to meet the objective of providing affordable housing to people residing in rural areas. USDA loans aim for rural development in Texas and offer multiple benefits as compared to other private and government funded loan programs. Continuing the discussion further, in this post we list five reasons for choosing a USDA loan in Texas. Take a look. 1. No Down Payment While home loans such as the FHA and conventional loans require the borrower to supply a 3.5 to 5 percent down payment, Texas homebuyers can get up to 100 percent financing without spending a penny as down payment. On top of that, you also save a significant amount on the upfront fee required for financing. No matter whether you are a first time or repeat home buyer in Texas with little or no amount to pay a down payment, simply apply for a USDA loan in Texas and save yourself from the burden of paying large down payments. 2. Competitive Interest Rates Most borrowers think about monthly mortgage payments going over the roof when it comes to securing conventional home loans. USDA home loans, on the other hand, are federally backed by the US Department of Agriculture, which is why lenders feel comfortable in lending to people who fulfil the eligibility guidelines. Due to federal backing, borrowers can also expect to get competitive interest rates than conventional loans that doesn’t fluctuate according to credit score, income, and other factors. 3. Flexible Credit Score Requirements Many home buyers fail to qualify for conventional loans due to stringent credit score guidelines. USDA loans don’t require you to have a phenomenal credit score and in most cases, even a 640 credit score would also suffice. Remember that USDA loans in Texas are federally backed and therefore, lenders consider applicants with a blemished credit score provided they meet other eligibility criteria for securing the loan. Even if your credit score is not at par, lenders also accept rent slips, utility bills and cell phone bills to assess suitability. 4. Zero Private Mortgage Insurance Home loans that have a high loan-to-value ratio or low down payments require the borrower to pay an upfront PMI fee, which isn’t applicable to USDA loans. Borrowers only need to pay an upfront premium that insures the lender against borrower defaults, should any situation arises. Nonetheless, the upfront premium is much lesser than PMI costs and can be rolled with the financing and can be closed without putting any money down. That said, the borrower can notice a visible reduction in their monthly mortgage payments. 5. Exclusively for Low and Medium Income Group Individuals The USDA aims for rural development in Texas by providing loans to qualified homebuyers at competitive rates. The USDA hasn’t kept a limit on the maximum amount of the loan, however, there are certain limits on the income requirements of an individual. The rule says that the borrower’s income can’t exceed 115 percent of the area’s median income. You are eligible for any given amount, provided you fulfill the income guidelines and other required criteria. The Bottom Line The USDA home loan program is ideal for those living in rural or suburban areas and wish to purchase their a home in that area. Though funding is available all year around, the USDA processes applications on a first come first serve basis. The approval of loan is based on furnishing of required documents and meeting the eligibility criteria. The best way to increase your odds of getting a loan approved is to consult a mortgage professional to guide you from start to finish. If you need financial assistance to construct or repair a home in a rural or suburban area in Texas, the USDA loans is an ideal option. Offered to raise the standard of living of people with low to moderate income, the USDA rural development loan program allows borrowers to finance up to 100 percent of their potential house. Like other loan programs, USDA home loans have certain requirements that applicants must meet to ensure they qualify for them. Here’s a sneak peek into the USDA loan amount, income, and property requirements. Loan Amount Limit One of the biggest advantages that USDA loans offer is that these loans don’t have a cap on the maximum loan amount. This allows applicants to consider more property types including town homes and those that are part of gated communities - till the time these houses fall under the eligible USDA area. USDA lenders decide what loan amount to approve after evaluating your credit score, debt-to-income ratio, assets, income, and previous mortgage history, if any. Income limit Although there’s no limit on the loan amount, the USDA rural development mortgage, in Texas, Florida, or anywhere else, has certain income limits. Put simply, your income must not exceed 115 percent of the county’s median income where you live. To calculate the total income, the underwriter will take into account your gross, and income from all the members who’ll be living with you in the house. In addition, they’ll consider the income of any co-applicants, if any. You can click here to check the USDA income requirements for your county. Location Requirements Under this requirement, the home you’re planning to buy or build must be in an area whose population falls below the figure of 10,000. If the government has declared the area as a place that lacks serious mortgage credit, then its population must be less than 20,000, for you to own a home there through the USDA. The good news is that many small towns and metropolitan suburbs come under the eligible areas, which is why it would be correct to say that USDA loan location requirements are quite liberal. Property Requirements To ensure the house you buy has safe living conditions, the USDA lays down certain property requirements. The first, of course, is that the property must be structurally sound and hygienic. Other requirements include:
In addition to the above requirements, the applicant and their family must not have any residential property in their name, when applying for a USDA loan. They must also be in a condition to afford the mortgage payment. To learn about these and other such requirements in detail, and make an informed decision about buying a USDA loan in Texas or elsewhere, speak to a loan banking officer or contact a USDA approved lender. The process of foreclosure moves quickly and you could find yourself on the street within days, if you don’t know how to fight the process. In some states, such as Texas, it can take only 27 days for a lender or the bank to repossess your house. Foreclosure is applicable on all types of loans including FHA, conventional and USDA home loans. If necessary steps aren’t taken, you can find yourself losing your home, if you have missed your loan payments . There are a few things you can do to help ensure you keep your home and hold off foreclosure.
Negotiating with your Lender The first thing to do when you fall behind on your loan payments, or are unable to further pay what is due, is to approach your lender. Try to negotiate on the terms of the loan and your payment. Assess your current financial situation and prepare a plan to manage your monthly payments. Modification in the loan If you are unable to make payments on your home loan, one of the ways to stop losing your house, is by persuading your lender to modify your loan. Contact your lender and find out if you are eligible for a loan modification that can make your payments manageable. You can find a suitable buyer, for instance, and work with your lender to modify the assumption/lease clause. You can get this clause deleted and allow another buyer to assume the loan. The down payment from this short sale can help you pay off your outstanding past due loan balance. Declaring BankruptcyIf nothing works out in your favor, declaring bankruptcy is one of the moves which will stop foreclosure. The federal law prohibits any mortgage lender to collect your loan payments, which will save your property from a foreclosure. Bankruptcy, however, just buys you more time to recover financially. You can workout some agreement with your lender, so that your house does not go on sale. ConclusionFollow the guidelines mentioned above to avoid losing your house. You can apply for another loan to refinance your existing one. If your house is in a rural area in Texas or nearby areas, you can find many trusted lending companies to find a loan officer to apply for a USDA home loan in Texas. |
AuthorDarrick encourages readers to post issues that need immediate attention in terms of home buying; such interactions will enhance reader engagement and provide a road-map for others Archives
November 2017
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