Perhaps, you don’t like the city life. Perhaps, you don’t have the money to get a home in a posh building. None of such things should stop you from owning a home, thanks to USDA loan program. For the uninitiated, USDA Home Loan is a form of mortgage loan that’s offered to property buyers in rural areas, by the US Department of Agriculture.
Options in USDA home loan
You can choose to get USDA home loan from an approved loan lender, backed by a guarantee from USDA, which reduces the mortgage rate considerably, and you don’t have to pay a down payment. For people/buyers from extremely low 0income groups, USDA also offers direct loans, where the interest rate is extremely low, often at 1%. There’s also another kind of program from USDA, which offers direct financial assistance to homeowners for home improvement and upgrades. All these programs and options are available only in rural areas as approved by the USDA.
Understanding difference between traditional mortgage and USDA home loan
This brings use to the question – What’s the difference between traditional mortgage and USDA home loan?
- First and foremost, you don’t need to pay a down payment for USDA loans, unlike mortgage loans, which is a big advantage. Not to forget, traditional mortgage options are available everywhere, both in cities and rural areas, while USDA loans are designed to help and improve economy, real estate, and standard of living in rural areas.
- The interest rates on such loans are obviously lower than traditional mortgage, making these financing choices more viable to low income groups in the rural regions. You can check online for detailed USDA home loan rates. In case of traditional mortgage, there’s always a premium interest, at least in most cases.
- In case of USDA loans, there are income restrictions, based on region, and whether you get the loan or not depends on your income. While there are considerations for things like ‘Child care’, you may not be qualified for USDA loans if you already have a considerable, dependable income. That’s not the case with mortgages.
Finally, let’s not forget that USDA loans are only available for homes that will be owner occupied. You cannot buy a home with USDA loans and make money out of it. There are no such restrictions, on the other hand, with regards to mortgages. Consider your options, understand your income, and other relevant factors to take a call.