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The Truth About VA and USDA Home Loans

For those of you thinking about applying for a VA or USDA home loan, you will want to read this in its entirety.

Chastin J. Miles
Feb 24, 2016 · 4 min read

It’s very common for one to seek a VA or USDA home loan for a number of reasons. The biggest reason though is the zero down payment that these loans require. Hey, why would you want to pay a down payment if you don’t need to right? Well before you go jumping the gun on this, I want to make sure you are really knowledgeable about these loan types.

A while ago, I started something called The #MillennialMOVEment series. My mission for this is to educate today’s biggest population of first-time home buyers. Millennials are here and there are a lot of us. (Hence, I’m a millennial as well, and I sell real estate to other millennials.) In previous posts and videos, I’ve dissected FHA home loans and also Conventional home loans. I also have a podcast on iTunes that I speak about these on. You can check out those episodes here. Now it’s onto VA and U SDA loans.

In true Chastin J. Miles fashion, I like to bring on an expert, in the field, to make sure you are getting true and accurate information. I am an active real estate agent but a mortgage professional or loan officer would be the one to really answer the tough questions when it comes to loans. I interviewed one of my mortgage partners, Dan, to see what he had to say about these loans. Here it goes:

Chastin: What are VA and USDA loans?

Dan: VA loans are a mortgage product that is guaranteed by the Department of Veteran Affairs. They are a great home loan option for the Veterans that sacrificed for our country. The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses.

USDA Loans is a program offered to those seeking rural property and is backed by the U.S. Department of Agriculture. Both have some appealing features if one can qualify.

Chastin: What are the requirements for a these loans?

Dan: VA requires a 580 credit score with established credit history. USDA requires a 620 credit score and has income/property restrictions that one interested would have to discuss with a lender to see if you can qualify. VA typically can have a higher debt-to-income ratio, in some cases up to 60%, where as USDA has lower ratios around 41%. Both loan products will require a two year history of dependable income unless recently graduating from school. Both have no required down payment*

Chastin: What are interest rates like for VA and USDA loans?

Dan: VA rates are very competitive, as some lenders will be around a 3.875% today on a 30 yr fixed. USDA rates should be slightly better anywhere from 3.625–3.75 on a 30 yr fixed note. Again, you will want to discuss with a lender where your profile falls and how you may qualify.

Chastin: What do you think of VA and USDA loans?

Dan: The VA loan is an awesome product! I charge no fees or points for any of my clients and can get them into a new home literally at no cost with a very competitive interest rate. USDA loans are an excellent option if one “fits the box.” I say this because there can be a lot of moving parts to a USDA file; the property fitting the requirements, credit scores, income restrictions, etc.

There you have it. VA and USDA home loans. I’ve helped a good number of buyers purchase a home with these loans. The biggest thing when it comes to any loan is speaking with a lender about them. You will want to make sure you have a personal relationship with someone in the industry that can answer all of your questions. The properties you can qualify for vary in each city or town.

Before you decide to seek out a home loan, make sure you know your options. Know if USDA or VA is the right loan for you. If you have not had a chance, check out my recent articles on FHA home loans and also Conventional home loans.

Lastly, before you start searching for a home, get pre-qualified. It will not help you to shop for a home without knowing what you qualify for. Know your rates and how much you can be approved for. That will save you time and energy when it comes to shopping.

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