Compared to other government-backed mortgages, it’s harder to find USDA lenders – much more the good ones. How do you find the right servicer?
After searching for viable mortgage products that suit your needs and your finances, you finally decide to get a USDA loan.
Considered one of the best mortgage programs available today, a USDA loan requires no down payment, fixed interest rates, has flexible credit guidelines making room for borrowers with low credit ratings, and has no minimum limit on purchase price.
Unfortunately, finding lenders who offer USDA loans may not be as easy as finding lenders for other government-backed mortgages such as VA and FHA loans.Get today’s mortgage rates!
Before you commit yourself to lender hunting endeavors, it’s important that you first realize that the USDA does not fund USDA loans (there are exceptions); they only insure them (or a portion of them). That means the department pays for all or part of the loan if you ever default on your USDA loan payments.
In exchange for the guarantee, the lenders make sure that only borrowers who meet the USDA’s guidelines are approved for the loan. Both the lenders and the USDA evaluates your application. However, lenders also have the right to turn down your application, even when you meet the USDA’s qualifications. This is an inherent right among lenders since it is their investment placed at stake, after all.
Knowing your loan type is also necessary before you initiate the process of finding a lender.
The USDA has two main loan products:
a) Direct loan – Available to borrowers who earn less than 50 percent of the area’s median income, the USDA’s Direct Loan program offers mortgage for the purchase, construction, and renovation of a property. The borrower must be someone who have exhausted all other loan options but weren’t able to get any, and must not hold any other housing loan for that matter. The loan funds directly come from the department, hence the name.
b) Guaranteed loan – The more common loan option which you can get from a private lender, a Guaranteed loan is available to borrowers who earn less than 115 percent of an area’s median income. You also cannot hold any other housing program, or able to obtain financing from other lending sources.
Other points of consideration
Aside from the important notes above, the following should also be taken into account before you apply:
The property must be located in a place designated by the USDA as rural. Take a look at the USDA’s map for rural-identified areas.
Because the USDA loan program is designed to cater to the needs of low-income buyers, a high income will not land you an approval on this opportunity. Your income is compared to the area’s average income to determine your eligibility. That said, you should also know that the department considers your household’s total income for the same purpose.
Where to find a USDA approved lender
You can start here. This contains a list of lenders approved by the department.
You can also ask your bank if they offer a USDA loan or if they can refer you to one.
You may contact the department as well for some recommendations of available lenders in your area.
Another alternative is to check your local pages, or ask recommendations from friends and family.
Before you settle in a choice, make sure you shop around first. Lenders may vary in their charges and interest rates. You can use these information to compare lenders and narrow down your choices the best option.Click to See the Latest Mortgage Rates»