Abilene USDA Home Loans

With the high average initial costs and stringent requirements for most mortgage loans on the market today, it is not difficult to understand why many people prefer renting to purchasing a home. Not all mortgages, however, are financially demanding. Government-backed programs, such as the USDA home loan, make affordable housing available to people from all walks of life, giving them a fighting chance to become homeowners.

What are USDA Home Loans?

The USDA home loan is a mortgage program backed by the U.S. Department of Agriculture (USDA). It is designed to provide accessible home loan options to moderate-income and low-income households wishing to purchase a primary home in qualified rural areas.

If you’re looking to buy a home in a rural area but were denied a conventional mortgage, you may want to try your luck with a USDA Direct or a USDA Guaranteed Home Loan.

The 2 Types of USDA Mortgages

The USDA Direct and USDA Guaranteed loans provide no-down-payment mortgage financing in rural areas, but they are two very different programs. 

• USDA Direct Home Loan

The U.S. Department of Agriculture itself originates USDA Direct Home Loans. Still, they are only available to low-income and very-low-income borrowers who cannot qualify for any mortgage loan without decent, safe, sanitary housing. The typical loan term for a USDA Direct loan is 33 years, up to 38 years for very low-income applicants.

• USDA Guaranteed Home Loan

Low-to-moderate-income families earning less than 115% of their area’s median income can avail of the USDA Guaranteed mortgage from an approved USDA lender. The USDA guarantees 90% of the mortgage amount, making it possible for qualified borrowers to obtain a 30-year fixed-rate mortgage with zero down payment.

Capital Home Mortgage offers USDA-guaranteed home loans in Abilene, which you can use to buy, construct, repair, renovate, or relocate a primary residence in qualified areas across the state.

Qualification Requirements of USDA-Guaranteed Loan

1. Down payment 

USDA-guaranteed loans do not require a down payment, but borrowers must pay a loan guarantee fee of 1%.

2. Debt-to-income ratio

The ideal DTI ratio is 41% or lower. Borrowers with DTIs over 41% may still qualify if they have a history of meeting all their financial obligations despite their high debt-to-income ratio.

3. Credit score

Most lenders want to see a credit score of 640 or higher. But because the USDA doesn’t require a credit score, borrowers with poor credit or no credit history may still qualify if they can demonstrate the ability and willingness to repay the loan. 

Positive rental payment history or other nontraditional credit that supports your application can increase your chances of getting a loan.

4. Income

The applicant must be employed for at least one year or have a two-year self-employment history. Moreover, the program is only for individuals and households with incomes not exceeding 115% of their area’s median income. 

5. Property location

The property must be located in an eligible rural area. 

6. Property type

The loan is solely for the purchase of primary residences. Second homes and investment properties are not allowed. Also, the property must not have an in-ground swimming pool.

Reasons to Avail of a USDA-Guaranteed Mortgage

USDA-guaranteed loans offer the following benefits to qualified borrowers:

•  No Money Down, 100% Financing

USDA Loans are among the last mortgages with no down payment and 100 percent financing. It’s an ideal option for families needing a home but with little money saved for the upfront costs.

• Ample Eligible Locations

The USDA’s definition of “rural” is quite broad. Many small towns, suburbs, and communities on the outskirts of major U.S. cities qualify as “rural” by USDA standards.

• Lenient Requirement

The USDA Loan program has established more forgiving eligibility requirements to facilitate the home-buying process for households earning a low to moderate income. 

• Competitive Rates

USDA mortgage rates typically have more competitive 30-year fixed rates than conventional and FHA-backed loans.

How To Obtain a USDA Loan in Abilene

Are you considering a USDA-Guaranteed Home Loan? Get in touch with one of Capital Home Mortgage’s mortgage specialists today! 

We’ll provide you with the information and guidance you need, so you can better understand your options and what you can afford. If a low-down payment mortgage is what you’re looking for, we have other government-backed options, like the FHA and VA loans, that may better suit your needs and budget. 

Contact us at (325) 387-8387 for more information about mortgage products in Abilene, TX.