Another good, government backed loan option for people with less than stellar credit is the USDA mortgage program. These USDA loans are designed to encourage home ownership in rural areas. They are intended for lower income families, so there are income limits to qualify.
USDA Mortgage Loans with $0 Money Down and Rural Homes Allowed
USDA loans can be obtained with 100% financing, and a 640 credit score is typically required to qualify for most USDA lenders, but some approved lending companies have been known to approve USDA loans to people with 620 credit scores if they are able to check all of the other boxes. Yes, the USDA credit requirement is slightly higher than FHA loans because no money is required down to get the mortgage. This creates more risk for the USDA lender.
- No Down-Payment Required
- Financing for Rural Properties
- Low Income Opportunities
The takeaway with USDA mortgages is that people in rural areas are not forgotten as the USDA loan program offers 100% financing to qualified borrowers. Yes there is mortgage insurance premium and yes there are limits on the size of USDA loan amounts, but they are very attractive mortgage options for people that live in the country. And because the mortgages are backed by the Department of Agriculture you may be able to score a very good interest rate with no down-payment needed either. USDA loans, for example are often advertised with interest rates that are comparable to conventional rates. Even with a 620-credit score, you may get an interest rate on an USDA home loan is available at a great mortgage rate.
Remember that qualifying for USDA loans will depend upon showing the mortgage lender that you meet the USDA loan requirements and property rules. And, with USDA loans, you might be able to get approved for a USDA mortgage even if you have little credit history recorded. Before you get too excited, consider speaking with an experienced USDA mortgage lender and get everything in writing.