Guide to Usda Loans While Purchasing A House

Consider a USDA mortgage loan when you purchase your next house. If you are looking outside of a metropolitan area and want 100 percent financing, USDA may be right for you.


The multitude of options available for home loans can leave you confused if you’re trying to sort through them. However, if you know what you want and have an idea of how much you can afford, finding the best loan is much easier. If you are planning on purchasing a house, need 100 percent financing and don’t have great credit, a USDA mortgage loan may be the best way to go.

What is a USDA loan?

A USDA loan is a loan backed by the United States Department of Agriculture. In the past a USDA loan was called a farm loan because it was only used to purchase properties in rural areas. Today, this type of loan is not just for “farmers.” There are many more Americans that can now qualify, and you can purchase properties closer to major metropolitan areas.

A USDA loan is a good option if you don’t have an outstanding credit rating or you can’t afford a down payment. With the USDA guarantee, lenders are able to provide you with favorable loan terms up to and including today’s best mortgage rates. The USDA home loan program offers 100 percent financing, and qualified borrowers are not required to pay down payment or mortgage insurance.

Why should you choose a USDA loan?

USDA loans have advantages that cannot be found in other types of loans. Some of these are as follows:

  1. Credit flexible. USDA loans do not require a high credit score. As long as you show an ability and willingness to pay, you can be eligible to qualify.
  2. No monthly mortgage insurance. Aside from providing great interest rates, USDA loans do not require you to pay for mortgage insurance.
  3. No down payment. Other loan programs, such as FHA and conventional loans, require you to put money down, and some loans require more money down to get the best mortgage rates. However, with a USDA mortgage loan, no down payment is required for the lowest mortgage rates. This means that you can save a whole lot of money that would have otherwise been used towards the down payment.

USDA loans also offer no prepayment penalties and can be used to purchase a new or existing single-family home in rural or semi-rural areas. Because of these benefits, the USDA loan is one of the top choices among first-time home buyers.

What are the general eligibility requirements?

The general eligibility requirements for receiving a USDA loan are that:

  • You must be a citizen of the United States or not restricted from permanent residency.
  • You must have an income less than the maximum allowed by the USDA home loan program.
  • You must live in the property as your primary residence (non-occupants co-borrowers are not allowed).
  • You must purchase a property in a USDA-approved area (typically in a rural or semi-rural area).

If you have tried obtaining a loan from a bank but have been turned down because you cannot afford a down payment, open your doors to other options. Your dream of home ownership may finally come true through a USDA loan.

About Author
Josh Harmatz joins as a contributor and is a founding partner and the Director of Operations for Voyage Financial Group, Inc. He had previously served as a Regional Manager for a small bank out of Florida and he managed offices across California for the one-time industry leader, Ameriquest Mortgage. His eight years of mortgage experience have spanned all capacities of the lending business and he has worked diligently to share his knowledge and experience with the public. He holds a California Real Estate Broker’s license, and earned his master’s degree in Business graduating summa cum laude from the Sacramento State College of Business.