Deciding to purchase a home can be an overwhelming experience for any potential home buyer. In addition to taking the time to scour through newspaper ads and online searches to find an ideal home, buyers also have to worry about securing adequate financing which isn’t always easy in today’s economy.

Conventional lenders are more strict than ever before when it comes to borrower eligibility. With most programs, applicants must have stellar credit scores and histories and are generally expected to have a down payment near 20 percent of the home’s sales price simply to secure financing. For a modest home purchase of $125,000 that means borrowers are expected to put down $25,000 out of pocket, not including other costs normally associated with purchasing a home.

For many interested home buyers, conventional lending options simply make home ownership either unaffordable or inaccessible to obtain. However, the USDA home loan program tends to alleviate the major costs associated with financing so that more people can have access to the dream of home ownership.

What is the USDA Home Loan?

The USDA home loan is a home financing option provided by the USDA’s Department of Rural Development that has been designed to make securing a mortgage easier for those interested in living in rural or outskirts areas. There are two types of home loans generally provided by the program, the Direct and the Guaranteed, and both are 100 percent backed by the government. By providing interested home buyers with a loan option that is backed by the government, borrowers are able to save out-of-pocket expenses through various benefits.

Why Choose a USDA Loan?

While a USDA home loan may not be an appropriate choice for residents wishing to live inside the city limits of larger cities such as Miami, Los Angeles, or Boston, it is an ideal choice for those wishing to live just outside city limits or in more rural areas. Reasons why the USDA home loan is a better choice over conventional lending include:

• No loan limits
• No private mortgage insurance required
• No down payment needed
• Regulated closing costs

What are the Eligibility Requirements?

The USDA Home Loan program is unique in that it requires both the borrower and the home being purchased to meet certain eligibility requirements. While a home must simply be safe and listed in an area deemed “rural” by the USDA, a home buyer must meet the following qualifications:

• Reasonable credit history
• A mid-range credit score of 620
• Proof of stable income and employment
• The ability to afford monthly mortgage payments
• Has an income that does not exceed 115% of the area’s median income level

If you are interested in obtaining a USDA home loan, you should speak with a USDA loan specialist or contact your local Rural Development office. Both resources will be able to answer any questions you have regarding the loan or loan process, and will be able to point you in the right direction so that you can be on your way to purchase a home.

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This is a guest article provided by Kevin Pearia, Content Director for USDALoans.com