A rural development loan is different from an FHA or conventional loan. Depending on the area that you are looking to purchase in, a USDA (or RD - rural development) loan offers many benefits. All mortgage products have different qualification criteria, but a great loan officer help you decide which product fits you best. Let’s take a closer look at what a USDA, or rural development loan, has to offer.
Competitive Mortgage Interest Rates
As USDA loans are backed by the United States Department of Agriculture, their corresponding interest rates may be lower than other mortgage options. While rates vary from lender to lender, and can change based on other factors, USDA loans offer competitive rates and savings.
No Down Payment Required
Arguably the best benefit of a USDA loan is that no down payment is required. With 100% financing you can purchase a home sooner. USDA and VA loans are the only government-backed loan options that don’t require a down payment.
Flexible Credit Requirements
In order to qualify for the USDA’s automated underwriting system, you’ll need a score of 640 or higher. Many conventional lenders have a minimum score of at least 660, however some may require a credit score as high as 720 in order to qualify.
Lower Mortgage Insurance
PMI, or private mortgage insurance, is required for conventional loans if less than 20% of the value’s value is put down. USDA loans do not have PMI. However, they have two fees that other loan types do not. An upfront guarantee fee is paid when you close on your USDA loan. This is a 1% fee of the total financed amount. There is also an annual fee that is combined with your monthly mortgage payment. The annual fee is 0.35% of the loan’s current balance. Combined these fees are typically lower than a PMI payment, and the annual fee will decrease as your balance becomes lower.
These benefits and advantages can make buying and owning a home easier. The most important part of the home buying process is finding a mortgage loan officer that can help you find the best loan possible. The experts at Standard Mortgage (NMLS#: 44912) have been helping home buyers and homeowners for over 90 years.