Reviewing the Pros and Cons of USDA Home Loans!

Buying a home is on every person’s wish list. Of course, with increasing costs of properties and changing trends of the real estate market, not everyone can afford a conventional bank mortgage. If you are one of them and don’t mind buying a home away from the maddening city crowds, a USDA home loan might be a good choice. A USDA home loan, for the uninitiated, is a mortgage offered by the U.S Department of Agriculture, which doesn’t require a down payment and usually has a low interest rate. The loan can be used to buy a home in any region that has been recognized by the U.S Department of Agriculture as rural or suburban under the loan program.

Websites like have complete information as how you can apply and get preapproved for such a home loan. In this post, we take a look at the pros and cons.

Pros at a glance

  • The very first advantage of USDA home loan is 100% financing. You don’t need to pay any down payment, which is also available for VA loans, but that’s only available for military personnel. This is probably the best way to own a home, as long as you are capable of paying the monthly payments.
  • Secondly, the interest rate on USDA home loans is usually on the lower side. While the region, location of the property and credit score of the applicant can impact the interest rate, it is still lower than a conventional mortgage.
  • In case of USDA home loans, mortgage insurance must be paid, but the raid is considerably low at just .35%.
  • There are also no lot size restrictions, and depending on other aspects, some of the manufactured & modular homes might make the cut, as well.
  • It should be noted that there is no pre-payment penalty for USDA home loans, which is a good advantage. You never know when you have the money to repay the mortgage.

The credit score does matter, but you can get approved, which can be considered a big plus compared to bank mortgage.

On the flip side

If you were hoping to buy a home in NYC, this is not for you. USDA home loans are designed to shift the interest of home buyers towards rural and suburban areas, and therefore, the geographical restrictions cannot be ignored. Only people who cannot afford a conventional home or have specific income limit can apply for such loans, which can be bummer. It is also important to note that you can only buy your primary residence with a USDA home loan. In short, there is no way you can make commercial gains from the property. Also, you cannot buy duplex homes.

While there is no denying that USDA home loans might not be a great choice for everyone, but it’s viable for a considerable part of the population. You can check online to find more details on how you can get started, and yes, make sure that the home selected is within the regions recognized by USDA.