A USDA loan is a loan designed for low-income borrowers who are looking to purchase a home in rural areas. This government-backed mortgage offers hope and happiness by making homeownership more affordable. As a first-time homebuyer, you also dream of providing your family with a space they can call home, a place that offers comfort and a better future. Even if you don’t have any prior experience with taking a home loan in Illinois, you don’t need to feel hesitant. At Robert A. Mortgages, we are committed to providing you with clarity about the process.
For the information or insights, you can call today. In the meantime, let’s discuss what benefits a USDA Loan has to offer:
Eliminating the Down Payment Barrier
In most of the loans, borrowers are asked to pay a down payment, which is a pre-decided percentage of the total purchase price. For low-income borrowers, arranging a down payment is one of the barriers that restricts them from taking the loan. At that point, the government-backed mortgage, the USDA loan, helps. What sets it apart from other loan types is that it doesn’t require any down payment. This removes the biggest hurdle because arranging such a substantial amount in one go is not practically feasible for individuals with limited income. Also, as the loan program helps to finance the entire purchase price, borrowers get the opportunity to use their savings for other expenses.
Better Interest Rates Mean Better Savings
The lender charges an interest on the lending amount. This interest is the benefit that the lender receives from lending money to the borrower. For instance, if the borrowed amount is $5,00,000 and the interest is 5%, then the interest on the amount will be $25,000 per year. However, from the borrower’s perspective, interest is an expense, and a borrower would always want to minimize this expense. That’s where the USDA loan benefits. The interest rate on a USDA loan is comparatively lower than that of other home loan options, such as a conventional loan. This lowers the monthly payment, enabling better savings throughout.
Reduced Private Mortgage Insurance (PMI)
When down payments are less than 20%, mortgage lenders use an insurance policy called PMI to protect themselves in case of default by borrowers, and this cost is added to the monthly payment. Even USDA loans have PMI, but it’s cheaper than conventional loans. This is another great advantage beyond no down payment and a lower interest rate.
Besides this, there are several other benefits of a USDA Loan, such as no pre-payment penalties, potential for refinancing, and closing cost-assistance. If you want to learn about additional benefits or check if you qualify for this loan, then reach out to us at Robert A. Mortgages. Call now!