From Lake Michigan to the Ohio River and everywhere in between, Indiana offers a diverse landscape of areas to call home. Whether you like living in the city or prefer the suburbs, or you are looking for lakefront property to rest and relax or country living to farm or raise livestock, Indiana offers it all in an affordable package that you can call Home!
A USDA home loan, also known as a USDA Rural Development Guaranteed Housing Loan, is a mortgage loan offered for many rural properties by the U.S. Department of Agriculture. The program is one of a few that offer 100% financing, so NO downpayment is required.
First, let us define the USDA Rural Development Indiana areas. The areas include “open country and places with a population of 10,000 or less and – under certain conditions – towns and cities with between 10,000 and 25,000 residents”. If you are unsure if the property meets the rural guidelines, here is the USDA Rural Development eligibility map.
The program was designed for low-to-moderate income households to help them purchase affordable housing. It is possible to have too much household income, as the program looks at the income of all adults that will be living in the home. There are a few exceptions for adult children who are in school and employed at the same time. If you want to verify the maximum income levels for your county, click here for your state and county income limits.
What are some advantages of a USDA Rural Housing Loan?
One of the greatest advantages is that the program offers 100% financing for many rural properties in Indiana. This means less money out of your pocket, especially with the affordable interest rates and loan terms. The other advantage is that there are no maximum loan amounts, but the borrower has to qualify with a reasonable debt-to-income ratio that includes their total cost of housing as well as auto loans and credit cards, etc.
Although the program does require the borrower to pay a Guarantee Fee up front and a small fee each month, the total monthly payment may be less than a loan with the same interest rate but requires monthly mortgage insurance.
What are some disadvantages of a USDA Loan?
One of the major disadvantages of the USDA Rural Housing loans in Indiana is that not all properties will qualify since they need to be located in an “eligible” area. You can check the USDA Single Family Housing Eligibility map to see if your property qualifies.
The other disadvantage is that the borrowers must qualify with their income, but the household must have a total income under the state and county income limits. Click here to go to the Single Family Housing Income Eligibility page. This means that if a husband or wife is the only one on the loan, their spouse or even an elderly parent on social security who lives with them could put them over the income threshold.
What are some of the program highlights?
- No down payment required
- 30 year fixed rate
- 102% + financing (100% plus the guarantee fee that can be financed or paid for by the seller)
- Can finance closing costs if appraisal above sales price
- Minimal mortgage insurance required
- No cash contribution required from borrower!!!!!!!
- Gift Funds Allowed!!!!!!!
- No maximum loan amount (although there are family income limits)
- No reserves required
- Competitive rates (as set by the underwriting lenders)
- Streamlined credit approval for scores above 640!!!!!
- Can refinance an existing USDA loan to get a better interest rate if available
What are some other options for mortgage loans in Indiana?
For borrowers that wish to purchase a property that is not in a USDA eligible area, an FHA loan may be a good alternative. This is also true for those borrowers who have a debt-to-income ratio too high for USDA guidelines or have family members who have income that will exceed the current limits, as well as those who do not meet the credit guidelines such as a recent bankruptcy. To find out more, visit the FHA Loan page.
For borrowers with good credit, a conventional loan may be an option. These programs offer down payments of either 3% or 5% dependent on several factors. If you are a first time home buyer (meaning you haven’t owned a home in the last three years), you may qualify for a mortgage with just 3% down. To find out more, visit the Conventional Loan page.
For borrowers that are current duty military or have prior military service, a Veterans Administration loan may be an option. They offer 100% financing and no monthly mortgage insurance, which makes them one of the best programs available. A Certificate of Eligibility is required to process a VA loan, however, they are relatively easy to obtain and we can assist in securing it. For more information, visit the VA Loan page.