Last Updated on September 19, 2024 by Luke Feldbrugge
There are several types of home loans for police officers out there. But, did you know that there is a specific government-backed loan that requires zero down payment, designed for lower credit scores and first time home buyers, and can be used across most of the United States? It’s called a USDA Home Loan, and it’s the perfect deal of a police mortgage program.
What is a USDA Home Loan?
USDA loans are an option for police officers and other applicants who wish to buy property in rural areas. These loans are backed, or insured, by the United States Department of Agriculture (USDA). The USDA defines rural as a town with a population of less than 35,000 people. So, while you might think of a farm when you hear rural, around 97% of the United States land is actually considered rural.
According to the USDA, these mortgages “assists low- and very-low-income applicants obtain decent, safe, and sanitary housing in eligible rural areas by providing payment assistance.” Basically, USDA home loans allow for someone, or a household, making low to moderate income eligible for homeownership. This includes first time home buyers as well as people who have owned homes in the past.
Before you quit reading thinking that your income won’t qualify because you make too much money, consider this: the income guidelines apply to all adults living in the household. So, if your retired parents live with you, or your grown children are still at home, the income threshold is higher. Find out what the income eligibility is in your state.
Advantages of USDA Home Loans for Police Officers
USDA Home Loans for police officers offer low interest rates, and do not require a down payment. It is an excellent option for lower income earners who are finding it difficult to come up with a 20% down payment for a home. They’re also perfect for someone with lower credit who is unable to qualify for conventional loans.
Since demand for police officers and law enforcement in rural areas is usually needed, chances are you might need to move to a more rural area at some point in your career. Or, maybe you’re already renting in a USDA-defined rural area and are looking to purchase a home. USDA Home loans do not need to be used by first time home buyers either. They can be used to build a home on land, or to renovate an existing home. A USDA home loan is a good choice for any of these situation, if you qualify.
The main advantages of USDA home loans are:
- Does not require a down payment.
- You are able to pay these loans back before the end of the term with no penalties.
- USDA home loans have fixed interest rates, meaning your rate will always stay the same.
- Loan terms are generally 33 years, meaning you have that long to pay the loan back.
- USDA loans do not have a credit minimum. However, most lenders will ask for a score of 640.
- You can use a USDA home loan to build a new home or buy an existing home.
- USDA loans can also help refinance or renovate your current home if you live in an approved rural area.
Requirements for a USDA Home Loan
USDA mortgage loans do have very strict requirements that must all be met to be eligible, however. If you’re not sure if you or the property you wish to buy is eligible, you can use this tool from the USDA to check the program specifics for your state. You can also talk to a Homes for Heroes loan specialist, who will be able to walk you through the requirements and all your questions. Plus, our loan specialists have reduced fees for police officers and other heroes like teachers, healthcare workers, military, EMS, and firefighters. This is just one of the ways Homes for Heroes can save you even more on your home purchase.
USDA Home Loan Eligibility Requirements
- Citizenship – To qualify for this home loan, you must be a U.S. citizen, or meet certain noncitizen requirements.
- No Housing – You must be without decent, safe, and sanitary housing options.
- Unable to Obtain a Loan – You must be unable to obtain a loan from other sources, like conventional or FHA loans. This is typically because of credit or down payment restraints.
- Primary Residence – The home you buy with the USDA home loan must be the home you live at.
- Federal Programs – Since this is a government-backed loan, you must be eligible to receive other federal programs.
There are some other requirements that you’ll need to meet in order to purchase a home in general. These are:
Credit History
To get a USDA Home Loan, you should have a credit score of at least 640. While there is technically no federal credit requirement, loan lenders like to see scores of 640 and up. Lenders will use your past payment history and income to assess your creditworthiness. Creditworthiness is the comprehensive look at your ability to pay back the loan. If you have not been regularly paying your bills or credit cards, you are unlikely to get approval for a USDA home loan.
Lenders require that borrowers have a certain minimum monthly income to qualify for any type of loan. This is to ensure that you’ll be able to afford your monthly mortgage payments. If you do not make the minimum amount designated by your lender, your loan may also not be approved. In the case of USDA home loans for police officers, you also cannot make over the maximum amount determined by the USDA. This is because USDA loans are intended to help those with low and moderate income.
Stable Income
This loan requires that you have stable, regular income for at least the past two years. It is crucial to prove to your lender that you regularly get paid. Homes for Heroes lending specialists are always working with police officers and other law enforcement officials, and understand the nature of your schedules. Between shift work, overtime, and on-call schedules, they will be able to work with your work history to get you the loan you need.
This may include calling your current employer to better understand your hours and pay, and to verify that you are in fact employed. Your lender will also want to see proof of income in the form of your W2’s from the previous two years, along with tax returns.
Debt Paying History
To be approved for any home loan, you must also show your lender that you are willing to pay the loan. That is very different from the ability to pay. Your lender will want to see proof that you have made all payments on time, generally for the last 12 months. This includes all other loans and credit card bills. If any payments are going to collections, you will probably not qualify for the USDA home loan.
USDA Home Loans vs. Conventional Home Loans
Among the other types of home loans for police officers, the most common type of mortgage loan in the United States is the Conventional home loan. USDA home loans have some unique advantages compared to conventional loans. Here’s how the two types of mortgages compare:
- USDA Home Loans for police officers do not require down payments. USDA loans also finance 100% of the home value. To get a conventional loan, you almost always have to provide a down payment, usually a minimum of 3%. Then, the difference of the down payment and the price of the home is provided in the loan value.
- There are income limitations to buy a home with USDA home loans, based on your state and county. Conventional home loans do not have restrictions on income, although you usually need to make a certain percentage of the loan amount for a lender to approve your application.
- To get a USDA home loan, you must buy the property in what the USDA defines as a rural area. On the other hand, you can use a conventional home loan for property anywhere.
- USDA home loans can only be used if the home you are buying is your primary residence. Conventional loans can be used on any kind of home, including second homes, vacation homes, or cabins.
- One of the stipulations of a USDA home loan is that the home you are buying is for your residential use and not for investment. This also includes doing any kind of business from your home, like a side-hustle. But, you can get a conventional loan to buy an investment property to rent out, or do other for-profit activities at.
Property Requirements
The home you wish to buy with an USDA home loan needs to serve as your primary residence. It also needs to be in an USDA-approved area. However, the loan can be used to buy new construction, condos, townhouses, manufactured homes, or foreclosed homes. These homes must also pass an inspection to ensure that they have essential qualifications like adequate roofing, operational electrical and plumbing, and are structurally sound.
The reason these things are a requirement is so that you are living in safe housing. The USDA does not want to see you get sick or injured living in your home. They also know that some of these issues can be very expensive to fix, and they do not want you to spend even more on a money pit. Also, if you have an unsafe home, the odds go up that the house becomes unlivable or condemned before the end of the loan, which can lead to higher instances of defaulting on the loan. The USDA wants to make sure they can receive compensation for the entire loan.
The property requirements of a USDA eligible house are:
- Located in a USDA defined rural area, usually with a population of less than 35,000 people.
- Generally the home must be 2,000 square feet or less.
- The property you purchase cannot have an in-ground swimming pool.
- You can not use the property for anything relating to producing income.
- Must pass specific inspection points.
USDA Home Loans for police officers can help you purchase a home, even if you think it might not be possible. It is an excellent choice for those planning to move to, or already live in, a rural area without access to other loan options. This loan finances 100% of the total property value, ensuring that you can comfortably move in. It is a fabulous loan option for police officers looking to purchase a home.
Want to save even more on your home purchase? Sign up for Homes for Heroes home buying program. It’s free to sign up, and there’s no obligation for you. Simply sign up today and a real estate agent or lending specialist will reach out to you and discuss your home buying needs. As a thank you for being a hero in law enforcement, Homes for Heroes real estate agents will give back part of their commission to you in cash after your closing. On average, our heroes save over $2,400 when buying a home. Sign up today!
