Waco Rural Home Loans

The USDA home loan program was established in 1991to increase homeownership rates in rural areas. This government initiative assists low-income people in purchasing homes in rural areas, though not all of the areas it covers are necessarily rural. Qualified borrowers can use the USDA home loan to purchase, refinance, renovate and repair a home.

The USDA Home Loan

USDA home loans, also known as rural development loans, are government-insured mortgages that assist low-income rural residents who cannot qualify for a conventional mortgage. The home loan program is designed to help households living in unhealthy or unsafe rural conditions obtain homes with modern utilities and adequate space. 

Qualified borrowers can obtain a USDA loan with no down payment and may roll their closing costs into their mortgage or receive seller assistance for minimal out-of-pocket costs. Moreover, USDA mortgages usually have low fixed interest rates.

Two Types of USDA Loans

The United States Department of Agriculture (USDA) offers two mortgage loan programs: Section 502 Guaranteed Loan and Section 502 Direct Loan. Both programs assist buyers with low to moderate incomes purchase homes in rural and small-town communities.

• USDA Guaranteed Home Loans 

The USDA Guaranteed Home Loans are extended by a bank or mortgage company and are available to people with a broader range of incomes. With 90% of the loan amount guaranteed by the government, lenders are willing to provide USDA loans at a fixed rate with no down payment.

• USDA Direct Home Loans 

The USDA issues the USDA Direct Home Loans to eligible borrowers who cannot obtain an affordable mortgage from other lenders and lack access to safe, sanitary, and decent housing. To qualify, your household income should be less than 80 percent of the area median income (AMI). Qualified borrowers must apply directly at the USDA Regional Office near them.

USDA Home Loan Requirements

To be eligible for a USDA mortgage, both the borrower and the property must meet specific requirements set by the USDA, such as: 

• The home must be located in a USDA-qualified rural area.
• The home must be used as a primary residence.
• The borrower’s PITI (mortgage principal, interest, taxes, and insurance) payment should not exceed 29% of the household income.
• The borrower’s debt and mortgage payments must not exceed 41% of the gross monthly household income.
• The ideal credit score is 640, but borrowers can qualify with a lower score.
• The borrower is a U.S. resident or legal non-resident alien.
• The borrower must not be delinquent on any federal debts.

Benefits of a USDA Home Loan

Homebuyers who wish to purchase a home in USDA-qualified areas should seriously consider a USDA loan for the following reasons:

• Designed for lower-income borrowers.
• 100% financing with zero down payments.
• Lower fees and competitive interest rates.
• More lenient credit requirements than conventional mortgages.
• Borrowers with credit issues and a history of bankruptcy/foreclosure may qualify. 

Qualify for a USDA Home Loan in Waco

Are you interested in a Waco USDA loan? Capital Home Mortgage offers guaranteed USDA loans with the best loan terms and interest rates. If you’re a first-time homebuyer, our mortgage specialists can assist you at every step, from completing your application until the loan’s closing.

You must submit your application to USDA Rural Development for USDA Direct Loans. 

Need more information about the USDA Guaranteed Loan? Call us at (254) 213-7343 or apply online to get prequalified for a USDA loan.