What Is a USDA Loan?
A USDA loan is a type of mortgage that is backed by the United States Department of Agriculture. These loans are designed to encourage home buyers to purchase homes in rural areas of Massachusetts, making it easier for lower income buyers to purchase a home and promoting economic activity in rural regions.
A USDA loan can only be used for homes in designated rural areas. While your loan may be provided by a mortgage lender like Griffin Funding, USDA loans in Massachusetts are guaranteed by the USDA. Since USDA rural development loans in Massachusetts are insured by the government, lenders are able to offer beneficial terms such as no down payment requirements and competitive rates.
How Do USDA Loans Work in Massachusetts?
When you apply for USDA loans in Massachusetts, there are two types of loans you can apply for: USDA guaranteed loans and USDA direct loans.
USDA guaranteed loans are guaranteed by the USDA but offered by a mortgage lender. If you apply for a loan through Griffin Funding, you’re applying for a USDA guaranteed loan. Since the USDA guarantees your loan, you don’t have to make a down payment and you have access to more favorable terms and rates.
USDA direct loans are a type of low-income mortgage loan offered directly by the USDA. USDA direct loans are similar to guaranteed loans, but they usually have more strict requirements. For example, you have to be a low-income home buyer who can’t find financing anywhere else to get approved for a USDA direct loan.
If you’re interested in a USDA purchase loan or a USDA construction loan in Massachusetts, you can apply through Griffin Funding to see if you qualify. Once you fill out an application, we will provide you with a rate and an estimate of the loan amount you qualify for. Griffin funding will serve as your lender throughout the USDA mortgage process.
Pros and Cons of USDA Loans
Understanding the pros and cons of USDA loans is a key part of making the right decision. Applying for a USDA loan can help you purchase a house without making a downpayment, but make sure you compare your options to find the right loan for you.
Some benefits of Massachusetts USDA loans include:
- No down payment: USDA loans don’t require a down payment, which helps minimize the upfront costs of buying a home.
- Flexible credit requirements: Credit requirements for USDA loans aren’t as strict as traditional mortgage credit requirements, making it easier to get approved with lower credit scores.
- Competitive rates: USDA loans typically offer lower interest rates, which can save you a lot of money in the long run.
- Flexible guidelines: Borrowers can secure a USDA mortgage loan in Massachusetts even if they’ve had foreclosures or credit setbacks in the past.
- Relatively low mortgage insurance: USDA loans come with an upfront fee of 1% and a monthly guarantee fee of 0.35%.
However, there are also downsides to USDA loans:
- Restricted to rural areas: You have to buy a home in a designated rural area to qualify for a USDA loan
- Income limits: USDA loans have income limits, so high earners may not qualify
- Mandatory guarantee fees: USDA loans come with an upfront and annual guarantee fee
- Primary residences only: You can only qualify for a USDA loan for a primary residence
If you’re looking for a favorable loan as a low-to-moderate income home buyer in a designated rural area, USDA loans can be a great option. As long as you’re willing to buy a house in a rural area, you can save a significant amount on your mortgage with a USDA loan.
USDA Loan Requirements in Massachusetts
Before you apply for a USDA loan, you can look at USDA loan requirements in Massachusetts to make sure you qualify. Let’s take a closer look at some of the common USDA loan requirements:
- Credit score: Credit plays a smaller role in qualifying for USDA loans, but lenders may still look for a minimum credit score of 600 when you apply for a loan.
- Debt-to-income (DTI) ratio: Lenders use your DTI ratio to make sure you have a manageable debt burden and won’t be overwhelmed by a new mortgage.
- Income requirements: USDA loans are designed for low-income home buyers, so you may not qualify if your income exceeds a certain threshold.
- Time since last foreclosure: You can still get a USDA loan after a foreclosure, but you typically have to wait at least three years after the foreclosure date.
- Geographic requirements: The home you purchase with your USDA loan must be in a designated rural area as designated by the USDA.
If you’re having trouble getting approved for a loan, you may need to pay off debt or work on your credit score. You can use the Griffin Gold app to track your spending and monitor your credit as you prepare for homeownership. You can also contact us to learn more about our USDA loan requirements in Massachusetts.
Get Pre-Approved for a USDA Loan Today
USDA loans in Massachusetts are a great way to buy a home without having to make a down payment. As long as you meet the basic requirements and buy a home in a designated rural area, you may qualify for a USDA rural development loan in Massachusetts.
At Griffin Funding, we help you get access to the funding you need to realize your dream as a home buyer. Even if you can’t make a down payment or meet traditional mortgage requirements, we’re here to help. Contact us to learn more or apply online to see if you qualify for a Massachusetts USDA loan today.