Are you interested in learning more about the benefits of USDA home loans and finding out if you can qualify for this type of real estate financing? Mortgage Consultant Jamie Frampton, of Alabama-based Mortgage Team 1, Inc., shares her knowledge about rural development home financing options with LoveToKnow Mortgage readers in this exclusive expert interview.
Can you provide a general overview of what USDA home loans are?
A USDA Rural Development home loan under section Section 502 is a loan that is primarily used to help low-income individuals or households purchase homes in rural areas. Funds can be used to build, repair, renovate or relocate a home, or to purchase and prepare sites, including providing water and sewage facilities.
What are the advantages of participating in a USDA mortgage program rather than seeking a traditional home loan?
There are many differences between USDA mortgage and traditional home loan programs.
- Not limited to 1st time home buyers
- No down payment
- You can finance the 2% USDA guarantee fee
- The seller can pay all of the buyer's closing costs and prepaid items
- No mortgage insurance
- Qualifies for the community reinvestment act credit
- Low market interest rates
- Flexible credit guidelines
Traditional Loan Comparison
- 5% down payment
- Monthly mortgage insurance premium
- Seller contribution toward closing costs and/or prepaid items limited to 3% of purchase price
- Strict credit guidelines
- Credit and loan-to-value determines rate
Who can benefit from the USDA home loan program?
Any US citizen or permanent resident alien who does not currently own adequate housing and meets the income restrictions and credit requirements can purchase under the USDA program.
How can buyers target their home search to look for property that will qualify for these types of loans?
Select a real estate agent who specializes in rural areas and works with a lender that originates USDA loans on a regular basis. In some geographical areas the USDA website can be a great resource for identifying areas eligible for the program. However, it does not work in all areas. For example, it is not accurate in fast growing metropolitan areas such as Mobile, AL, where my office is located.
What can home buyers do to increase their chances of getting approved for a USDA loan?
The most important things for home buyers interested in financing a home through the USDA rural development loan program are:
- Monitor their credit
- Get pre-approved
- Work with a good Realtor
- Select a home that qualifies for USDA funding
What should buyers who want to seek USDA funding look for when selecting a mortgage broker or lender?
A loan officer at a mortgage broker is a person that shops on your behalf with multiple lenders to see which lender will offer you the best rate, closing costs and turnaround times for your unique situation. They do not work for any one particular company. They act as an independent agent for you. A loan officer with a lender is a person that works directly for one particular financial institution and can only secure a loan for you from that particular institution.
Whether you are dealing with a broker or a lender make sure that the loan officer is a full time active loan officer. Not all lenders offer USDA home loans so if you are seeking this type loan program make sure to ask if they offer USDA loans before making your final selection.
LoveToKnow Mortgage would like to thank mortgage consultant Jamie Frampton for taking time from her busy schedule to share her expertise with readers. If you'd like to learn more about USDA mortgages or other types of home loans, you may reach Jamie at (251) 445-2080. She holds the prestigious XINNIX Certified Originator (XCO) and works with clients throughout the state of Alabama.