If you are a homeowner with moderate or low income and need a loan to carry out expensive activities for your home, a USDA loan can be a perfect choice. After successfully applying for one, you can get funding for many home improvements or even buy a new property altogether.
With that said, it helps to know what to expect from such a loan. After all, loans can be expensive if you do not manage them well, and you would want to keep surprises to a minimum to ensure easy and prompt payments.
To help you ensure a smooth experience with your USDA loan, here is some helpful information that covers all the essentials you need to know:
What is a USDA loan?
USDA loans are loans that are either issued or insured by the United States Department of Agriculture. They are a viable source of funding for people with moderate to low income to enjoy great homeownership. As such, they are used to purchase, refinance, and renovate residential properties.
What are the pros and cons of USDA loans?
The most significant advantage of a USDA loan is that it does not require any down payment. Pair that with much lower interest rates compared to regular loans, USDA loans make for an incredibly affordable loan. You can also divide some of your closing costs into the loan balance itself. This can help you avoid having to pay a considerable sum at once, which is especially beneficial if you have trouble saving money or do not have much cash to work with.
The biggest downfall with USDA loans is that, while they do not require a down payment, they come with a few fees. For example, you will need to cover a guarantee fee. Such charges will not have to be paid upfront and annually. Another downfall of USDA loans it that it is quite limited. There are not many options for USDA loans, and only a few lenders can offer them.
What are the costs associated with USDA loans?
As previously mentioned, there is a closing cost to USDA loans. However, the amount will depend on the loan balance and the USDA program. Fortunately, you can roll some of these costs right into your loan balance, reducing the upfront costs of purchasing a home.
If you are building a new home, you will have to cover the inspections, which can run a few hundred dollars per inspection.
Do USDA loans require mortgage insurance?
Some loans, like FHA (Federal Housing Administration) loans, will require some insurance. However, USDA loans do not. With that being said, they come with guarantee fees that you need to pay upon closing and then annually. Fortunately, you can finance these fees, allowing you to spread the cost over a longer time.
Conclusion
As you can tell, USDA loans are quite forgiving to borrowers. They are much more affordable than many other types of loans, and they can be used in various ways.
With that said, take the time to look at the options available to you and compare as many USDA loans as possible. Some come with lower interest rates than others, and some may have much higher closing costs. By putting in the effort to make a wise choice, you set yourself up for the perfect loan to get you what you need without any surprises.
Lend LA offers loan application and approval services to get you the loan you need quickly and painlessly. If you are looking for USDA loans, reach out to us today! We are more than happy to help.
