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Essential Tips on Choosing USDA Loan Mortgage Companies 2024

By Oluchukwu Ikemefuna

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In 1991, the United States Department of Agriculture (USDA) developed a loan scheme known as the USDA loan to support low-income families in rural areas and the Agricultural sector in acquiring their dream homes. 

Also called the “Rural Development” or “Rural Housing” loan, the USDA loan is a 100% home loan designed to increase access to homeownership in rural and semi-rural areas. 

Choosing USDA loan mortgage companies can be tricky, especially in 2024, when it’s easy to fall into a trap while trying to buy a home. But with our essential tips, your chances of making the best decision increase. 

The Basic Concept of a USDA Loan

The USDA loan was designed for families with a low or modest income, families with an inconsistent source of income, families who can’t meet the equity contribution of conventional loans, and families who do not meet all, or most of the requirements for a traditional mortgage, but can’t get their minds off owning a home. The platform makes their dreams a possibility, offering low-interest rates, flexible terms, and no down payment.

The home being mortgaged has to be a primary residence and located in a USDA-eligible area, usually an area with an under-35k demography. The loan may be used to buy a furnished home, renovate an existing one, furnish a newly constructed one, etc.

The USDA loan comes in two forms: the USDA Guaranteed and the USDA direct loans. Mortgage companies that have received USDA approval to issue loans are involved in the Guaranteed Loan Program. USDA serves as indemnity for these mortgage companies, shielding them from bearing the brunt if the mortgagor defaults in repayment. With lowered risks and reasonable profits, these mortgage lenders are more willing to strike a deal with clients.

On the other hand, the direct loan program requires the USDA to issue loans themselves. Here, the interest rates and the Equated Monthly Instalments are extremely subsidised, as they target families with extremely low incomes.

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The Ultimate Tips for Choosing a USDA Loan Mortgage Company in 2024 

When applying for a Guaranteed USDA loan in 2024, many mortgage companies will pop up in your mind or even on the web as you Google. It can be overwhelming. You’re stuck on which to choose. But this is a decision that you can’t turn back on, so you have to make the right choice. The tips below will help you make the right decision.

Tip 1: Do the Underground Work

This is a preliminary stage where you conduct thorough research and prepare your documents. First, identify the mortgage companies that offer USDA loans and compile a list of the best ones. Some of the top USDA mortgage companies in America in 2024 are:

  • Flagstar Bank 
  • Guild Mortgage Bank 
  • PNC Bank, etc.

Forbes has rated the above mortgage lenders based on customer support, the best option for borrowers with low credit scores, speed of pre-approval, and other factors.

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Tip 2: Calculate Rates and Charges

Next, determine the interest rates the mortgage companies offer for USDA loans. Before you jump on mortgage lenders with the lowest interest rate, find out about their lender fees and other charges first, as some mortgage lenders charge exorbitant fees to compensate for the low interest rates. You might have to apply for a loan to get an accurate picture of what interest rate you qualify for and how much the loan will cost, inclusive of all due charges. Apply to multiple of these mortgage companies to receive their loan estimate. Compare these estimates and — here is a little trick — use a loan estimate from one lender to negotiate a lower rate with another lender. 

Steps to Take to Apply for a USDA Loan

To apply for a USDA loan, borrowers must follow these steps:

  • Determine eligibility by consulting online USDA maps.
  • Decide whether you want a guaranteed or direct loan
  • Submit applicable paperwork, including income, debts, and credit reports.
  • After pre-approval, search for new homes (or launch renovations on your current home).
  • Keep in mind that you’ll have fees associated with your loan. Guaranteed loans require an upfront 1% fee and annual fees of 0.35% as long as the mortgage is active.

Some additional fees may include processing fees, closing costs, appraisal costs, etc. 

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Frequently Asked Questions 

What is the Major Advantage of a Direct USDA Loan Over a Guaranteed USDA Loan?

Direct USDA loans can be used for renovation, repairs, construction, and other property-related expenses, whereas guaranteed USDA loans can only be used to purchase a home. Also, direct loans come with lower interest rates compared to guaranteed loans.

Who are Mortgage Lenders?

Mortgage lenders refer to financial institutions that loan money to individuals and corporate bodies to buy, construct, renovate or furnish a property.

Are Mortgage Lenders and Mortgage Companies the Same? 

Yes. Mortgage lenders and mortgage companies are both financial institutions that offer mortgages. 

What is the USDA Loan Income Limit in 2024?

The 2024 USDA loan income limit for families with 1-4 members is $110,650, and for families with 5-8 members, it is $146,050.

A Dream Supported by USDA Loan

So, if you’re dreaming of owning a house in a rural area, the USDA loan may be what you need to support those dreams, but it doesn’t come easy. Whether you apply for the USDA direct loan or the USDA guaranteed loan, ensure you thoroughly plan and research, especially when selecting mortgage companies. Conduct market research and obtain advice from lawyers and financial experts before you make the final decision. 

Meanwhile, we’ve got you covered for more expert tips on your journey to owning your home. Visit our blog for more insights.

Follow us for more on X or Twitter, @SiliconAFriTech.

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Oluwajuwon Oladiti
Oluwajuwon Oladiti

Oladiti Oluwajuwon is an ardent reader and a voracious writer who is passionate about informing the public with first-hand, authentic information. His writing expertise has spanned over 5+ years, an odyssey that began in 2018. Over the years, he has crafted pieces across multiple domains, including religion, education, politics, and tech. There are two principles at the core of his writing: information must be genuine and accurate, and there is nothing erudite about speaking in terms people don't understand. While maintaining technicality, messages must be passed in a way that resonates with the readers.

Oluwajuwon is also a software engineer who specializes in backend development with Python, and he has an unwavering passion for music, pop genre especially.

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