USDA loans are reserved for borrowers looking to apply for a mortgage for a property in an area that is considered to be in a rural development area by the Department of Agriculture. They are issued through the USDA Rural Development Guaranteed Housing Loan Program, by the United States Department of Agriculture. These loans are also in place to encourage people to live in rural areas, that would benefit the US Department of Agriculture by helping to improve the economy and quality of life in rural areas.

Benefits of USDA Loans

USDA loans can be beneficial for a few key reasons:

  • The entire value of the home can be financed (meaning you would put no money down), similar to VA loans
  • Usually this loan program offers more competitive interest rates
  • Closing costs can be rolled into the mortgage

Some USDA Requirements

There are also a few requirements and limits associated with USDA loans:

  • Depending on the county you are applying for the loan in, there may be income limits. There is also a maximum income limit, limiting wealthy home buyers from using the program
  • The property that is being purchased must be owner-occupied, meaning this loan may not be used to purchase an investment property
  • Lastly, as mentioned before, the property that is being purchased must be in an area designated as rural by the Department of Agriculture

A full list of USDA limits, programs, their requirements and a map to show what areas are designated rural you can visit the US Department of Agriculture’s website here.

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