Today's post is brought to you by Kevin Pearia of USDAloans.com. If you have questions about this post, please feel free to contact me and I'll hook you up with Kevin's contact info.
Financially Responsible Way to Obtain/Refinance the Farm Life Once exclusively available to low-income farmers, USDA loans help even moderate-income farmers finance a home. Despite the fact that non-farmers may be eligible for USDA loans, the program remains a popular choice for livestock farmers. For those looking for a new property where they can also raise livestock in low-stress environments, USDA loans may be a perfect financing option.
Farmers who raise livestock understand improving the quality of life improves the quality of the product. Farmers should also be able to improve their quality of life with a housing upgrade that won’t cost a fortune. That’s where USDA loans come into play.
As part of the Rural Development Program, USDA loans lessen the financial burden of purchasing a home. When farmers choose to finance through a USDA loan, they save money they can funnel into their livestock operation.
One way USDA loans reduce the fiscal stress of home buying is by eliminating the down payment. It’s rare to find a financing option with this perk, but USDA loans flaunt it. In turn, it allows farmers to save tens of thousands of dollars right off the bat. On top of that initial savings is the possibility of getting the seller to cover some of the closing costs. Alternatively, it’s possible to include legal fees, closing costs and the guarantee fee in the loan.
The funding fee for USDA loans is a miniscule 2 percent. When the fee is included in the loan, USDA loan borrowers may have a loan worth 102 percent of the home’s value. Regardless of the loan’s size, it comes with fixed interest rates and no private mortgage insurance (PMI) for as long as 38 years.
For livestock farmers who love their property but would like to make some improvements, USDA loans can still help. Construction, repairs, renovations, purchases and refinances may be eligible for USDA loans.
These loans can only be used in eligible areas per the USDA’s requirements. Basically, areas that may be eligible are in the open country or towns, cities or villages with fewer than 25,000 people. The latter areas must also be without sufficient credit for mortgages to low- and middle-income families, and be outside a Metropolitan Statistical Area. Chances are good that farmers running a low-stress livestock operation are within these limitations.
However, there are financial requirements too. The USDA requires borrowers to have an income that is no greater than 115 percent of the area’s median income. Per the size of the family, the property to be purchased must be reasonably sized and the family’s current housing has to be inadequate. The USDA determines such factors.
USDA-approved lenders also like to see:
-credit scores of at least 620;
-debt-to-income ratios no higher than 41 percent;
-and PITI (principle, interest, taxes, insurance)-to-income ratios no higher than 29 percent.
Thanks to Kevin for being my guest blogger for the week!
Until next time,