If the dream of owing your own home seems like a far-away goal, you may be the perfect target for a little-known home loan program. Sometimes, it seems nearly impossible to save up enough money to make a down payment on a house, and most people have some credit issues as well, both of which could prevent your from buying your own home. If this describes your situation, you may qualify for a government-sponsored loan program, so read on to learn more.
United States Department of Agriculture (USDA)
Don't let the word "agriculture" mislead you. This program can provide a means of home ownership for nearly everyone, not just farmers. This home loan program's chief motivation is to create opportunities for people who want to move away from city centers (or "urban" areas) and populate more suburban and rural areas. The USDA provides users with a helpful interactive map that allows you to zoom in on specific addresses to find out if your dream home is located in a covered area. Many large swaths of real estate are included in the eligible areas. The USDA offers two different loan programs, one of which could be right for you.
The USDA Direct Loan Program
If you are having trouble coming up with a down payment and have a fairly low income, the USDA Section 502 Direct Loan program could be a good fit for you. No down payment is required, but your income must fall into the low to very low income bracket. The income limit does vary quite a bit and is based on the median income of the county where the home is located.
The USDA Guaranteed Loan Program
If you can come up with a bit of a down payment, 10% of the home's price, you may qualify for a Guaranteed Loan. With this option, your income can be a little higher. It should be pointed out that the 10% down requirement is still far less than what traditional (or "conventional") loans usually require. Just as the 502 program above, the income is based on the particular county.
Are These Loans Guaranteed?
There may some confusion about the concept of government-guaranteed home loans. It is not the consumer (you) who is guaranteed benefits, but the lending institutions. If the borrower fails to make mortgage payments, the government pays the lender for any lost revenue. The consumer, however, still benefits from this assurance to the lenders, since lenders could be more likely to lend given this type of guarantee.
Be sure to talk to your real estate agent about your interest in using a USDA loan to purchase your realty.