A USDA loan, also known as a USDA Rural Development Guaranteed Housing Loan, is a type of mortgage loan offered by the United States Department of Agriculture (USDA) to help families and individuals in rural areas achieve homeownership.
The primary benefits of USDA loans include:
- No Down Payment Required: USDA loans are unique in that they allow borrowers to purchase a home with no down payment required, which can help make homeownership more accessible for families who might not have enough savings for a down payment.
- Low Interest Rates: USDA loans typically offer lower interest rates than other types of loans, which can save borrowers money on their monthly mortgage payments over time.
- Flexible Credit Requirements: While USDA loans do have minimum credit score requirements, they tend to be more flexible than traditional mortgage loans, which can make it easier for borrowers with less-than-perfect credit to qualify.
- No Private Mortgage Insurance (PMI) Required: Unlike other types of loans that require borrowers to pay for private mortgage insurance (PMI) if they have less than a 20% down payment, USDA loans do not require PMI.
- Available in Rural Areas: USDA loans are designed to help families and individuals in rural areas achieve homeownership, which means they may be more accessible in areas where other types of loans are less common.
- There are income restrictions for qualifying.
It's worth noting that while USDA loans are primarily intended for families and individuals in rural areas, some suburban areas may also be eligible.