USDA Loans

USDA Loans for Rural Development

USDA loans are a nonconventional mortgage option developed to help people with low to moderate income find affordable home financing in rural and suburban areas. Insured by the U.S. Department of Agriculture Rural Development, these loans have easy approval requirements and great benefits like 0% down payment. Brian Masterson – Bay Capital Mortgage is a local mortgage professional in Annapolis who has extensive experience with these affordable home loans. Brian is represents several USDA-approved lenders. If you’re interested in getting a free quote or have any questions about these loans, contact Brian’s team.

A Nonconventional Mortgage Solution

USDA loans, also known as rural housing loans, are one of several types of nonconventional loans, which are mortgages secured by a division of the federal government. Other types of nonconventional loans are VA loans (sponsored by the U.S. Department of Veterans Affairs) and FHA loans (sponsored by the Federal Housing Administration). Each has a unique purpose to help a different group of people interested in buying homes. The USDA Rural Development department has several loan programs, and today we’ll focus on the Single Family Housing Guaranteed Loan Program. This program helps qualifying candidates purchase, build, rehabilitate, improve or relocate a home located in certain approved rural and suburban zones. In addition to helping families find affordable financing, these loans also encourage the development of less-crowded areas outside of busy cities.

Single Family Housing Guaranteed Loans aren’t actually funded by the USDA – they’re funded by private lenders and insured by the USDA. If a borrower fails to make payments on his or her loan, the USDA will reimburse the lender. This means lenders can open their doors to approve borrowers who might not otherwise qualify for financing.

There are many advantages to choosing a USDA loan. In addition to 0% down payment, USDA loans also have a very low mortgage insurance premium (MIP), which is much lower than MIP for most conventional loans and even other nonconventional loans. These are fixed-rate loans, with 15-30-year terms.

Eligibility Requirements for USDA Loans

To get approved for a USDA loan, you and the property you plan to purchase or renovate must meet certain requirements. First, your income must not exceed 110% of the local median income. In Maryland, those limits in most areas are $96,150 for a 1-4 person household, and $126,900 for a 5-8 person household. You’ll need to provide income verification and credit history during the approval process.

The home you purchase or are renovating must be in a USDA-approved zone. While homes in Annapolis city are not eligible, there are certain parts around Anne Arundel County which are. Our team can show you a map of eligible areas. It’s also important that your real estate agent only shows you homes in these approved zones, if this is the type of loan you choose. Your home will also undergo an inspection to ensure it is safe and sanitary.

Many Uses for USDA Loan Funds

You can use the funds from your USDA loan to purchase a new primary residence, purchase property with a dwelling on it, to make repairs or rehabilitations, install features or equipment to make your home more accessible or energy efficient, and even to purchase essential equipment like carpeting, ovens, or heating and cooling.

If you own a home in a rural area and are struggling to make your mortgage payment or it is in need of repairs, you may qualify for other USDA direct loans and grants like the Single Family Housing Direct Home Loan or Single Family Housing Repair Loans and Grants.

When you’re ready to learn more about USDA loans and other mortgage options, contact Brian Masterson – Bay Capital Mortgage in Annapolis to learn more. Brian and his team are here to guide you at every step of the way. We offer free, no-obligation quotes, so start your journey today!