With the rising cost of homes in the United States, it is highly important to take advantage of every opportunity to lower the cost of buying a home and make the mortgage process easier and a lighter burden on the buyer. When considering taking on a mortgage loan, a hefty down payment, high-interest rates, and a limited selection are all things that might prevent or deter a potential buyer from beginning the process. For qualifying individuals, some programs exist to make mortgaging a home a much more realistic ambition. Today, we will be discussing USDA loans in Maryland, what they are, who is eligible, and the many advantages that come with this program.
What is a USDA Loan?
A USDA loan is part of a Rural Development program by the U.S Department of Agriculture that is meant to assist lower-income families and individuals in being able to afford a mortgage in rural areas. The loan comes from the USDA Rural Development Guaranteed Housing Loan Program and is one of the least known, yet highly advantageous mortgage programs in the country. Want to know know what areas are eligible? The USDA has a useful tool that allows you to look up area maps or input a property address directly to see its eligibility.
Advantages of a USDA loan
The first and most attractive feature of a Maryland USDA loan is that it requires zero down payment. Without having to come up with a lump sum of cash to initiate the mortgage, those who could not regularly afford to take on a mortgage loan now can. There are also no pre-payment penalties for those who decide to pay off their mortgage earlier. You can finance closing costs into your loan as well as receive a lower fixed interest rate. With USDA loans, private mortgage insurance is not used. Instead, the USDA uses two fees, one being an upfront guarantee fee, equal to 1% of the total financed amount, that is due once the buyer has closed on the loan, and an annual fee, equal to 0.35% of the loans current balance, that is included in your monthly mortgage payment.
The Three USDA Home Loan Programs
Guaranteed USDA Loans
A guaranteed USDA loan is when the USDA partners with local lenders to offer a loan that the USDA insures a portion of the total mortgage should the buyer default on their loan. To be eligible for this type of USDA loan, adjusted household income may not be higher than 115% of the median family income in the area where the house is located. This encourages lenders to be more willing to offer better loan terms to low-income buyers with lower credit scores.
Direct USDA Loan
With a direct USDA loan, the funds are borrowed directly from the USDA. This is offered to low-income individuals who otherwise wouldn’t qualify for a typical loan from a bank lender. To receive a direct loan from the USDA, one must fall into the low-income category in the area where the home is located.
USDA Home Improvement Loans
Also designed to benefit low-income households, the USDA Home Improvement loan option helps to fund repairs or improvements to a dwelling. In some cases, the USDA could potentially combine these with grants that you would not have to pay back.
Who Qualifies for Eligibility?
To qualify for a Maryland USDA loan, you must first be a U.S citizen that has an income that falls below the set “low income” in the area you intend to purchase the home. The main qualification that is needed to qualify for a USDA loan is that the home is located in an area deemed “rural”. This means that metropolitan areas are exempt from USDA loans however, some suburban areas may qualify. The dwelling that the USDA loan is taken out for must be listed as the primary residence of the person signing the mortgage. With all of that taken into consideration, eligibility for a USDA loan is open to a large majority of Americans that live in rural areas and should be utilized accordingly.
Accessible USDA Loans in Maryland
The benefits of a Maryland USDA loan are immense and the eligibility fits a wide spectrum of potential homeowners. Taking advantage of this loan can make the difference between being able to afford a mortgage or not. Many people who are renters cannot come up with the initial down payment needed to secure a good rate and therefore are stuck renting. Without this obstacle, many Americans in rural areas can attain a mortgage. When shopping around for Maryland lenders, be sure to find one that maintains your best interest throughout the mortgage process. At Federal Hill Mortgage, we guarantee that we will be by your side every step of the way ensuring that you get the best rates available on the home that you desire. Call us or apply now to begin your journey into your new home.