If you're planning on buying a new home soon, but you don't have the cash, a USDA loan might be just what you're looking for. It does have some caveats, but if you have no down payment and are planning on buying in a rural area in Tennessee, this might be a great option for you.
What is a USDA Loan?
The United States Department of Agriculture (USDA) offers loans to people who are looking to purchase a home in a rural area. These loans are for low to very low-income individuals who have no other means to purchase a home and no down payment. The USDA restricts purchasing areas too low to middle income rural areas, so cities are out when it comes to obtaining a loan.
Do You Qualify for a USDA Loan?
There are several restrictions on this type of loan. First, you must fit the income bracket it's designed for. Second, you must have a credit score somewhere above 620 to 640. You must be able to provide proof that you can afford the payments and make payments in a timely fashion. On top of that, you must be a US citizen, qualified alien, or a US noncitizen national at the time of application.
USDA loans are not right for those who want to rent their homes out as a second source of income. Why? Because per the USDA loan regulations, you must use this home as your primary residence to qualify. The home must also be in an area approved for USDA loans.
USDA Loans Come with Fees
The downside to USDA loans is that they come with some hefty fees. You'll have to pay a 1 percent fee up front, although the fee can be rolled into the loan, itself. You must also pay a 0.35 percent annual fee which is amortized over the next 12 months. Each year, you are assessed the annual fee, which is then added to your total payment. This may or may not be a deal breaker for you, as this can increase your payment considerably, if you're not prepared for it.
Talk to Mortgage Investors Group and find out if a USDA home loan is right for you. We're the number one lender in Tennessee and our loan officers are ready to help you secure your future home.