Keeping your nose to the grindstone, using credit wisely and responsibly and paying your bills on time every month have their rewards, no matter how much or how little money you make.
One reward is how much easier it is to realize your piece of the American Dream – the opportunity to purchase your own home. A bonus for the low-income earner is a government-backed loan with no down payment.
The United States Department of Agriculture (USDA) Rural Development Single Family Housing programs may just be the best option for low-income folks with good credit and a steady job to buy a house.
The two most popular USDA home loan programs are the Homeownership Direct Loan Program and the Guaranteed Loan.
Both of these programs aim to help low-to-moderate-income people purchase homes in rural areas. Both have no down payment requirement.
The key differences between the direct loan and the guaranteed loan are as follows:
Remember, the guaranteed loan is for the moderate-income borrower. It is much like the FHA loan in that the government gives the lender a guarantee of repayment in the event the borrower defaults on the loan.
The biggest difference between the USDA loans and FHA is that USDA requires no down payment. Here are some basic benefits of the guaranteed loan:
This is the loan for you if you are low income but have decent credit and a steady job. You will borrow for the home directly from the U.S. government. Here are just a handful of the benefits of the USDA Direct Loan program:
To use either loan, the borrower must be purchasing a home in a rural area. The USDA defines “rural” as any town with a population of “25,000 or less that is not adjacent to a large city or that is not part of a continuous urban area.”
The home must be “modest” in size. The average USDA home is 1,200 square feet. Homes with swimming pools are ineligible. The loan cannot be used to purchase income producing property, furniture or other personal property, an existing manufactured home or for a home with non-essential buildings and land.
To determine if a particular property is eligible, visit the USDA Rural Development Property Eligibility website.
For a borrower to be eligible for the USDA Guaranteed or Direct Loan program you must:
An easy way to determine your income eligibility is by visiting the USDA Single Family Housing Income Eligibility website.
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